IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v73y2025ics1544612324017033.html
   My bibliography  Save this article

Impact of artificial intelligence on the labor income distribution: Labor substitution or production upgrading?

Author

Listed:
  • Wang, Changlin
  • Jiao, Du

Abstract

The extensive adoption of artificial intelligence (AI) technologies has sparked debates about their impact on labor markets. However, there is still limited empirical evidence on AI's impact on labor income distribution, particularly in emerging economies. While existing research focuses mainly on job displacement risks, few focus on how AI affects labor compensation in corporate settings. This study examines how AI adoption affects labor income share through a mediation analysis framework using a comprehensive dataset of 25,156 firm-year observations from Chinese listed companies (2010–2022). Our findings show that AI implementation positively influences labor income share through two key channels: improved innovation capacity and accelerated technology upgrading. These effects are more pronounced in nonstate-owned enterprises and nonheavy-polluting industries. These results challenge the conventional narrative of technology-driven labor displacement, suggesting that AI adoption, combined with investments in innovation and human capital, can promote a more equitable distribution of corporate income.

Suggested Citation

  • Wang, Changlin & Jiao, Du, 2025. "Impact of artificial intelligence on the labor income distribution: Labor substitution or production upgrading?," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324017033
    DOI: 10.1016/j.frl.2024.106674
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324017033
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.106674?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. David Autor & Anna Salomons, 2018. "Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share," NBER Working Papers 24871, National Bureau of Economic Research, Inc.
    2. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 61-103.
    3. David Autor & Anna Salomons, 2018. "Is Automation Labor Share–Displacing? Productivity Growth, Employment, and the Labor Share," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(1 (Spring), pages 1-87.
    4. Daron Acemoglu & Pascual Restrepo, 2018. "The Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment," American Economic Review, American Economic Association, vol. 108(6), pages 1488-1542, June.
    5. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 12, pages 1043-1171, Elsevier.
    6. Ajay Agrawal & Joshua Gans & Avi Goldfarb, 2019. "Economic Policy for Artificial Intelligence," Innovation Policy and the Economy, University of Chicago Press, vol. 19(1), pages 139-159.
    7. Frey, Carl Benedikt & Osborne, Michael A., 2017. "The future of employment: How susceptible are jobs to computerisation?," Technological Forecasting and Social Change, Elsevier, vol. 114(C), pages 254-280.
    8. David H. Autor, 2015. "Why Are There Still So Many Jobs? The History and Future of Workplace Automation," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 3-30, Summer.
    9. Morgan R. Frank & David Autor & James E. Bessen & Erik Brynjolfsson & Manuel Cebrian & David J. Deming & Maryann Feldman & Matthew Groh & José Lobo & Esteban Moro & Dashun Wang & Hyejin Youn & Iyad Ra, 2019. "Toward understanding the impact of artificial intelligence on labor," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(14), pages 6531-6539, April.
    10. Arntz, Melanie & Gregory, Terry & Zierahn, Ulrich, 2017. "Revisiting the risk of automation," Economics Letters, Elsevier, vol. 159(C), pages 157-160.
    11. Nicholas Bloom & Tarek A. Hassan & Aakash Kalyani & Josh Lerner & Ahmed Tahoun, 2020. "The Geography of New Technologies," Working Papers Series inetwp126, Institute for New Economic Thinking.
    12. repec:bin:bpeajo:v:49:y:2019:i:2018-01:p:1-87 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jing Yuan & Yinghui Wang & Jinxin Cao & Zongwu Cai, 2025. "Impact of Artificial Intelligence on Occupational Income Inequality in China," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202504, University of Kansas, Department of Economics, revised Feb 2025.
    2. Li, Yun & Qian, Jibing & Zhao, Huisha & Zhu, Mingxin, 2025. "Tourism law, enterprise agglomeration, and labor income," Finance Research Letters, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naude, Wim, 2019. "The race against the robots and the fallacy of the giant cheesecake: Immediate and imagined impacts of artificial intelligence," MERIT Working Papers 2019-005, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Fossen, Frank M. & Sorgner, Alina, 2022. "New digital technologies and heterogeneous wage and employment dynamics in the United States: Evidence from individual-level data," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    3. Gregory, Terry & Salomons, Anna & Zierahn, Ulrich, 2016. "Racing With or Against the Machine? Evidence from Europe," VfS Annual Conference 2016 (Augsburg): Demographic Change 145843, Verein für Socialpolitik / German Economic Association.
    4. Caselli, Mauro & Fracasso, Andrea & Scicchitano, Sergio & Traverso, Silvio & Tundis, Enrico, 2025. "What workers and robots do: An activity-based analysis of the impact of robotization on changes in local employment," Research Policy, Elsevier, vol. 54(1).
    5. Zhou, Yuwen & Shi, Xin, 2025. "How does digital technology adoption affect corporate employment? Evidence from China," Economic Modelling, Elsevier, vol. 147(C).
    6. Gries, Thomas & Naudé, Wim, 2022. "Modelling artificial intelligence in economics," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 56, pages 1-12.
    7. Cebreros Alfonso & Heffner-Rodríguez Aldo & Livas René & Puggioni Daniela, 2020. "Automation Technologies and Employment at Risk: The Case of Mexico," Working Papers 2020-04, Banco de México.
    8. Jasmine Mondolo, 2022. "The composite link between technological change and employment: A survey of the literature," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1027-1068, September.
    9. Davide Dottori, 2021. "Robots and employment: evidence from Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 739-795, July.
    10. Shimizu, Ryosuke & Momoda, Shohei, 2023. "Does automation technology increase wage?," Journal of Macroeconomics, Elsevier, vol. 77(C).
    11. Ryosuke Shimizu & Shohei Momoda, 2020. "Does Automation Technology increase Wage?," KIER Working Papers 1039, Kyoto University, Institute of Economic Research.
    12. Anderton, Robert & Jarvis, Valerie & Labhard, Vincent & Morgan, Julian & Petroulakis, Filippos & Vivian, Lara, 2020. "Virtually everywhere? Digitalisation and the euro area and EU economies," Occasional Paper Series 244, European Central Bank.
    13. Gries, Thomas & Naudé, Wim, 2020. "Artificial Intelligence, Income Distribution and Economic Growth," IZA Discussion Papers 13606, Institute of Labor Economics (IZA).
    14. Goos, Maarten & Rademakers, Emilie & Röttger, Ronja, 2021. "Routine-Biased technical change: Individual-Level evidence from a plant closure," Research Policy, Elsevier, vol. 50(7).
    15. Montobbio, Fabio & Staccioli, Jacopo & Virgillito, Maria Enrica & Vivarelli, Marco, 2022. "Robots and the origin of their labour-saving impact," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    16. Diaz Pavez, Luis R. & Martínez-Zarzoso, Inmaculada, 2021. "The impact of local and foreign automation on labor market outcomes in emerging countries," University of Göttingen Working Papers in Economics 423, University of Goettingen, Department of Economics.
    17. Rachel Ngai & Orhun Sevinc, 2025. "A Multisector Perspective on Wage Stagnation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 56, April.
    18. Oussama Chemlal & Wafaa Benomar, 2024. "The Technological Impact on Employment in Spain between 2023 and 2035," Forecasting, MDPI, vol. 6(2), pages 1-30, April.
    19. Cusolito,Ana Paula & Lederman,Daniel & Pena,Jorge O., 2020. "The Effects of Digital-Technology Adoption on Productivity and Factor Demand : Firm-level Evidence from Developing Countries," Policy Research Working Paper Series 9333, The World Bank.
    20. Arntz, Melanie & Gregory, Terry & Zierahn-Weilage, Ulrich, 2019. "Digitalization and the Future of Work: Macroeconomic Consequences," IZA Discussion Papers 12428, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Artificial intelligence; Labor income share; Innovation capacity; Technology Upgrading;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324017033. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.