In con- trast, the rationale for intervention that we propose applies during the transition to the long run, and the timing of externalities is central to optimal policy. [...] The planner maximizes the present discounted value of the additional output that this reallocation allows, given reallocation frictions and the cost of automation. [...] In this case, the distorsion in automation simply affects the timing of the output and consumption stream {Ct} and the econ- omy moves along its production possibility frontier (as opposed to inside). [...] The government internalizes the indirect effect of automation on output ∆t due to the reallocation it induces T′0 (·) > 0, in 27 addition to the direct effect. [...] This is the canonical trade-off between equity and efficiency emphasized in the literature on the regulation of automation.
- Pages
- 85
- Published in
- Canada
