Tech wars: Distributional consequences of global tech rivalry

Abstract

International competition over sophisticated tech is a modern feature of great power rivalry. Yet the automation delivered by this tech is a key source of rising inequality. While policy motivations stem primarily from great power political and defense competition, the automation has consequences for wider economic performance. We examine global economic consequences, using a six-region global macro model with multiple households, under Rawlsian, Benthamite, capital friendly, or GDP maximizing policy criteria. Tech drives are shown to deliver higher capital returns and more growth, and therefore to represent dominant strategies under all but a Rawlsian criterion, despite their exacerbation of inequality and low-skilled poverty. We then consider Gini-reducing fiscal interventions. These are shown to have few international spill-over effects and to be domestically attractive only under the Rawlsian criterion.