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AI-driven capital-skill complementarity: Implications for skill premiums and labor mobility

Author

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  • Wang, Shuo
  • Wang, Yuzhang
  • Li, Chengyou

Abstract

To explain the newly discovered coevolution of capital and labor structures, this study presents a modified capital-skill complementarity hypothesis within the framework of structural transformation. We propose that artificial intelligence (AI) and skilled labor exhibit relative complementarity. Specifically, advancements in AI services or AI-enhanced technologies incentivize the mobilization of skilled labor across different industry sectors. The direction of this labor movement is contingent upon variations across industry sectors, including AI output elasticity and the substitutability between AI and conventional production methods. This structural transformation process also induces fluctuations in skill premiums.

Suggested Citation

  • Wang, Shuo & Wang, Yuzhang & Li, Chengyou, 2024. "AI-driven capital-skill complementarity: Implications for skill premiums and labor mobility," Finance Research Letters, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010742
    DOI: 10.1016/j.frl.2024.106044
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    More about this item

    Keywords

    Artificial intelligence; Capital-skill complementarity; Skill premiums; Structural change;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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