05 Understanding consequences for public finances

Across Europe, automation may lead to a fall in taxable wage income. What are the consequences for public finances at a local and regional level?

In many European countries, income tax and collective contributions make up a considerable part of total tax receipts. At the same time, a growing literature has convincingly established the adverse effects of automation on employment and wages in local labour markets. A fall in taxable wage income implies a negative impact of automation on fiscal revenue, other things being equal. On the other hand, given that the public sector relies on some routine jobs, an increase in productivity due to automation could offset lost revenue and result in lower per capita expenditures from public finances.

As part of this project, we will empirically analyse how these processes may play out. We will also study the consequences of robotisation and capital flow for capital taxation. 

University of Oxford (Lead), Cambridge Econometrics.