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Democratic regulation of AI in the workplace

Author

Listed:
  • Roy, Jaideep
  • Saha, Bibhas

Abstract

When artificial intelligence (AI) displaces lower-skilled workers with higher intensity, electoral democracies may slow down automation in fear of unemployment and voter resentment. Using a Downsian model of elections where parties promise to limit automation and redistribute automation surplus, we show that when automation is highly productive democracies implement maximum automation, making all workers vulnerable to redundancy and distribute the entire surplus among the working population. Majority of the workers are gainers in the sense that their expected earnings exceed their (pre-automation) wage. When the automation surplus is low, democracies restrict automation and protect the high-skilled workers (including the median-skilled worker) but redistribute nothing to the vulnerable workers. Here, because of no compensation for redundancy all vulnerable workers become losers as their expected earnings fall below their basic wage. For highly productive automation, democracies achieve the first best worker welfare but otherwise may over- or under-provide automation.

Suggested Citation

  • Roy, Jaideep & Saha, Bibhas, 2025. "Democratic regulation of AI in the workplace," Games and Economic Behavior, Elsevier, vol. 152(C), pages 113-132.
    • Handle: RePEc:eee:gamebe:v:152:y:2025:i:c:p:113-132
    DOI: 10.1016/j.geb.2025.04.004
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    References listed on IDEAS

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    1. Daron Acemoglu & Pascual Restrepo, 2018. "Modeling Automation," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 48-53, May.
    2. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
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    4. Daron Acemoglu & Pascual Restrepo, 2022. "Tasks, Automation, and the Rise in U.S. Wage Inequality," Econometrica, Econometric Society, vol. 90(5), pages 1973-2016, September.
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D20 - Microeconomics - - Production and Organizations - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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