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Artificial Intelligence and the Skill Premium

Author

Listed:
  • Bloom, David E.

    (Harvard School of Public Health)

  • Prettner, Klaus

    (Vienna University of Economics and Business)

  • Saadaoui, Jamel

    (Université de Strasbourg)

  • Veruete, Mario

    (Quantum DataLab)

Abstract
How will the emergence of ChatGPT and other forms of artificial intelligence (AI) affect the skill premium? To address this question, we propose a nested constant elasticity of substitution production function that distinguishes among three types of capital: traditional physical capital (machines, assembly lines), industrial robots, and AI. Following the literature, we assume that 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

  • Bloom, David E. & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2024. "Artificial Intelligence and the Skill Premium," IZA Discussion Papers 16972, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16972
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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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