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Artificial intelligence, wage dynamics, and inequality: Empirical evidence from Chinese listed firms

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  • Wu, Yongqiu
  • Lin, Zhiwei
  • Zhang, Qingcui
  • Wang, Wei

Abstract

The impact of artificial intelligence (AI) on employment has attracted widespread attention, but the literature has generally viewed AI as a continuation of automation, arguing that technology will result in wage polarization. However, existing literature overlooks the unique aspects of AI technology. This study proposes new theoretical mechanisms and AI measure method to estimate the impacts of AI on wage dynamics and inequality. Based on an empirical study of data from listed companies in China from 2014 to 2022, we find that AI applications raise wages through three mechanisms: productivity improvement, crowding out low-wage routine jobs, and creating high-wage creative and social jobs. While executive pay does not increase because of AI applications, the pay for regular employees increases through job restructuring. Ultimately, AI applications narrow wage inequality between executives and regular employees. This study provides a new quantitative evaluation method for assessing AI progress. It also reveals the unique mechanisms of AI on firms' wage distribution, which differs from that of traditional technologies. These findings deepen our understanding of the complex relationship between AI development and wage changes.

Suggested Citation

  • Wu, Yongqiu & Lin, Zhiwei & Zhang, Qingcui & Wang, Wei, 2024. "Artificial intelligence, wage dynamics, and inequality: Empirical evidence from Chinese listed firms," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    • Handle: RePEc:eee:reveco:v:96:y:2024:i:pc:s1059056024007317
    DOI: 10.1016/j.iref.2024.103739
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    More about this item

    Keywords

    Artificial intelligence; Wage dynamics; Inequality; Listed firms;
    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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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