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Artificial intelligence and the skill premium

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  • David E., Bloom
  • Prettner, Klaus
  • Saadaoui, Jamel
  • Veruete, Mario

Abstract

What will likely be the effect of the emergence of ChatGPT and other forms of artificial intelligence (AI) on the skill premium? To address this question, we develop a nested constant elasticity of substitution production function that distinguishes between industrial robots and AI. Industrial robots predominantly substitute for low-skill workers, whereas AI mainly helps to perform the tasks of high-skill workers. We show that AI reduces the skill premium as long as it is more substitutable for high-skill workers than low-skill workers are for high-skill workers.

Suggested Citation

  • David E., Bloom & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2023. "Artificial intelligence and the skill premium," Department of Economics Working Paper Series 353, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus005:59342195
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    More about this item

    Keywords

    Automation; Artificial Intelligence; ChatGPT; Skill Premium; Wages; Productivity;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • 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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