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Dynamics of labor and capital in AI vs. non-AI industries: A two-industry model analysis

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  • Xu Huang

Abstract

There is an imbalance in the development of artificial intelligence between industries. Compared to non-AI enterprise, AI- enterprise will save labor, enhance innovation capabilities, and improve production efficiency. By constructing a two-industry model of AI and non-AI enterprise, this paper finds that with the development of artificial intelligence in the same industry, the AI enterprise will occupy a dominant position, attracting labor and capital from the non-AI enterprise into the AI enterprise. In different industries, the development of artificial intelligence improves the production efficiency of the enterprise. However, due to the price effect, non-AI enterprise benefits more. Labor and capital flow from AI enterprise to non-AI enterprise. In order to promote the improvement of production efficiency in the whole society, the government can tax non-AI enterprise and subsidize them to AI enterprise. Taxation promotes the degree of automation and the improvement of production efficiency, but it has only a short-term effect on the development of AI. At the same time, taxation inhibits the development of non-AI enterprise, and there is a high risk of unemployment. When both industries use artificial intelligence for production, the labor share and the capital share of the two industries will tend to the same value. The convergence of technology measures is conducive to increasing labor income share and reducing income inequality, but it is not conducive to innovation.

Suggested Citation

  • Xu Huang, 2024. "Dynamics of labor and capital in AI vs. non-AI industries: A two-industry model analysis," PLOS ONE, Public Library of Science, vol. 19(1), pages 1-31, January.
    • Handle: RePEc:plo:pone00:0295150
    DOI: 10.1371/journal.pone.0295150
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    References listed on IDEAS

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    2. Shi, Yu & Wu, Tong & Qin, Chuan & Liu, Bailu, 2025. "The value-creating potential of AI: A multi-dimensional analysis of effects and mechanisms," International Review of Financial Analysis, Elsevier, vol. 108(PB).

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