Prospects on the Labor Tax Income with Augmented Automation : A study of how advancement in technology changes industries and how it affects aggregated tax revenues

Technological advancements lead to improved capital productivity along with a complement for labor, where tasks normally are considered non-automatable. However, technological advancements reduce labor demand, leading to high levels of unemployment as industries adapt to automation. In return, unemployment created from high exposure of automation affect income from taxes, which leads to changes in the social welfare. This thesis tests high exposure of automation and the impact it has on the potential welfare of a country, reflecting the consequences of diminishing labor demand and possible counter measures on the declining tax revenue. Using the recent model of Acemoglu & Restrepo (2018) as analytic base, our estimates indicate the displacing effects on labor share have become more evident with evidence automation having less labor augmentation and more labor displacement