European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

No 399: When Should Robots Be Subsidized?

Subhrasil Chingri (), Debasis Mondal () and Klaus Prettner ()
Additional contact information
Subhrasil Chingri: Indian Institute of Technology Delhi
Debasis Mondal: Indian Institute of Technology Delhi
Klaus Prettner: Department of Economics, Vienna University of Economics and Business

Abstract: This paper studies optimal robot taxation in a static model with routine and non-routine workers. Robots substitute for routine workers and complement non-routine workers. In addition, robots are produced in a monopolistic sector that charges a markup over marginal cost. In the absence of monopoly power, the optimal robot tax rate is zero. When robot producers have monopoly power, the optimal policy corrects the markup distortion by aligning the effective robot price with marginal cost, conditional on the labor supply induced by the income tax system. The wage premium rises with the expansion of the tasks that robots can perform and declines with higher robot production costs. The results clarify the conditions under which robot taxation serves as a corrective instrument.

Keywords: Robot taxation, automation, optimal taxation, corrective subsidies, monopoly markups, wage inequality

JEL-codes: H21; H23; O33 October 2026

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