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Artificial Intelligence and Its Implications for Income Distribution and Unemployment

In: The Economics of Artificial Intelligence: An Agenda

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  • Anton Korinek
  • Joseph E. Stiglitz

Abstract

Inequality is one of the main challenges posed by the proliferation of artificial intelligence (AI) and other forms of worker-replacing technological progress. This paper provides a taxonomy of the associated economic issues: First, we discuss the general conditions under which new technologies such as AI may lead to a Pareto improvement. Secondly, we delineate the two main channels through which inequality is affected – the surplus arising to innovators and redistributions arising from factor price changes. Third, we provide several simple economic models to describe how policy can counter these effects, even in the case of a “singularity” where machines come to dominate human labor. Under plausible conditions, non-distortionary taxation can be levied to compensate those who otherwise might lose. Fourth, we describe the two main channels through which technological progress may lead to technological unemployment – via efficiency wage effects and as a transitional phenomenon. Lastly, we speculate on how technologies to create super-human levels of intelligence may affect inequality and on how to save humanity from the Malthusian destiny that may ensue.
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Suggested Citation

  • Anton Korinek & Joseph E. Stiglitz, 2018. "Artificial Intelligence and Its Implications for Income Distribution and Unemployment," NBER Chapters,in: The Economics of Artificial Intelligence: An Agenda, pages 349-390 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:14018
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    References listed on IDEAS

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    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Gatti, Domenico Delli & Gallegati, Mauro & Greenwald, Bruce C. & Russo, Alberto & Stiglitz, Joseph E., 2012. "Mobility constraints, productivity trends, and extended crises," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 375-393.
    3. Thomas Piketty & Emmanuel Saez & Stefanie Stantcheva, 2014. "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 230-271, February.
    4. Heidi L. Williams, 2013. "Intellectual Property Rights and Innovation: Evidence from the Human Genome," Journal of Political Economy, University of Chicago Press, vol. 121(1), pages 1-27.
    5. Anton Korinek & Joseph E. Stiglitz, 2018. "Artificial Intelligence and Its Implications for Income Distribution and Unemployment," NBER Chapters,in: The Economics of Artificial Intelligence: An Agenda, pages 349-390 National Bureau of Economic Research, Inc.
    6. Alp Simsek, 2013. "Speculation and Risk Sharing with New Financial Assets," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 1365-1396.
    7. Philippe Aghion & Benjamin F. Jones & Charles I. Jones, 2018. "Artificial Intelligence and Economic Growth," NBER Chapters,in: The Economics of Artificial Intelligence: An Agenda, pages 237-282 National Bureau of Economic Research, Inc.
    8. John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).
    9. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    11. Bruce C. Greenwald & Joseph E. Stiglitz, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 229-264.
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    Cited by:

    1. La Torre, Davide & Marsiglio, Simone & Privileggi, Fabio, 2018. "Fractal Attractors in Economic Growth Models with Random Pollution Externalities," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201801, University of Turin.
    2. Anton Korinek & Joseph E. Stiglitz, 2018. "Artificial Intelligence and Its Implications for Income Distribution and Unemployment," NBER Chapters,in: The Economics of Artificial Intelligence: An Agenda, pages 349-390 National Bureau of Economic Research, Inc.
    3. Geiger, Niels & Prettner, Klaus & Schwarzer, Johannes A., 2018. "Automatisierung, Wachstum und Ungleichheit," Hohenheim Discussion Papers in Business, Economics and Social Sciences 13-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    4. Bernardo S. Buarque & Ronald B. Davies & Dieter F. Kogler & Ryan M. Hynes, 2019. "OK Computer: The Creation and Integration of AI in Europe," Working Papers 201911, School of Economics, University College Dublin.

    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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