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How Does AI Affect the Pay Gap Within Firms: Mechanism Analysis Based on Personnel Structure and Corporate Investment

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  • Qiang Wu

Abstract

This study examines how AI impacts the internal pay gap within enterprises. Using data from listed companies in China and a panel data two‐way fixed effect model, findings reveal that AI widens pay gap, with executives in AI‐applied companies earning 0.327 times more than average employees. AI increases executive pay while hindering employee salary growth, especially in nonmanufacturing and private firms. Labor substitution AI reduces employee compensation growth, whereas labor enhancement AI boosts executive pay without affecting employee compensation. AI also influences personnel structure and enterprise investment in fixed assets and R&D, highlighting its “job substitution effect” and “productivity effect”.

Suggested Citation

  • Qiang Wu, 2025. "How Does AI Affect the Pay Gap Within Firms: Mechanism Analysis Based on Personnel Structure and Corporate Investment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 717-733, March.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:2:p:717-733
    DOI: 10.1002/mde.4400
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