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Artificial Intelligence and the Skill Premium

Author

Listed:
  • David E. Bloom
  • Klaus Prettner
  • Jamel Saadaoui
  • Mario Veruete

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

  • David E. Bloom & Klaus Prettner & Jamel Saadaoui & Mario Veruete, 2024. "Artificial Intelligence and the Skill Premium," NBER Working Papers 32430, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32430
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    More about this item

    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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