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Artificial intelligence and the skill premium: A numerical analysis of theoretical models

Author

Listed:
  • Cheng, Can
  • Luo, Jiayu
  • Zhu, Chun
  • Zhang, Shangfeng

Abstract

As a new engine in guiding China's high-quality economic development, it is important to study whether the development of artificial intelligence (AI) will increase the skill premium and affect labor income inequality. Based on Acemoglu and Restrepo's (2018a) task-based model, this study constructs a multi-sector dynamic general equilibrium (DGE) model to analyze the impact and mechanism of AI on the skill premium and performs a numerical simulation using China's industrial panel data from 2010 to 2019. The results show that AI widens the skill premium by substituting low-skilled labor with industrial robots and performing high-skilled labor tasks. The mechanism analysis reveals that AI also affects the skill premium by influencing factor flow and structural transformation. Based on these findings, this study provides policy suggestions for governments to mitigate the impact of AI on the labor market.

Suggested Citation

  • Cheng, Can & Luo, Jiayu & Zhu, Chun & Zhang, Shangfeng, 2024. "Artificial intelligence and the skill premium: A numerical analysis of theoretical models," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    • Handle: RePEc:eee:tefoso:v:200:y:2024:i:c:s0040162523008259
    DOI: 10.1016/j.techfore.2023.123140
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