IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_12800.html

AI, Task-based Production in General Equilibrium and Distribution of Labour Incomes

Author

Listed:
  • Rajat Acharyya
  • Sugata Marjit

Abstract

In a multi-sector general equilibrium model of task-based production, we examine the impact of two types of AI-driven finite changes, one in production-tasks in an AI-prone or AI-applicable sector and the other in the sector-composition of the economy, on the real wage and distribution of wage-income among workers of different skills. We establish that, contrary to the conventional wisdom of a sector-specific small Hicks-neutral type technological change unambiguously lowering real wage of the middle skilled workers despite their productivities improving, finite changes can eventually raise their real wage. But, the distribution of wage-incomes changing in favour of the high-skilled workers (relative to the middle-skilled workers) due to AI-driven finite changes will be similar to that due to small technological change, except that the relative gain of the high-skilled workers will smaller in magnitude.

Suggested Citation

  • Rajat Acharyya & Sugata Marjit, 2026. "AI, Task-based Production in General Equilibrium and Distribution of Labour Incomes," CESifo Working Paper Series 12800, CESifo.
    • Handle: RePEc:ces:ceswps:_12800
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp12800.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Erik Brynjolfsson & Danielle Li & Lindsey Raymond, 2025. "Generative AI at Work," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 140(2), pages 889-942.
    2. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    3. Jones, R.W. & Marjit, S., 1992. "International Trade and Endogenous Production Structures," RCER Working Papers 312, University of Rochester - Center for Economic Research (RCER).
    4. repec:bla:econom:v:54:y:1987:i:214:p:173-84 is not listed on IDEAS
    5. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2016. "Competitive General Equilibrium with Finite Change and Theory of Policy Making," Economics and Politics, Wiley Blackwell, vol. 28(1), pages 1-7, March.
    6. Jones, Ronald W., 2008. "Key international trade theorems and large shocks," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 103-112.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sugata Marjit & Kausik Gupta, 2023. "Inward‐looking policies, finite change, and employment: The capital reallocation effect," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 62-76, March.
    2. Christoph Riedl & Eric Bogert, 2024. "Who Benefits from AI? Self-Selection, Skill Gap, and the Hidden Costs of AI Feedback," Papers 2409.18660, arXiv.org, revised Apr 2026.
    3. Jiancai Pi & Yanwei Fan, 2022. "Financial frictions and wage inequality," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1064-1074, January.
    4. Riccardo Zanardelli, 2025. "The safe harbor paradox: when combining human and AI skills creates or destroys value," Papers 2509.14057, arXiv.org, revised Sep 2026.
    5. Soohyoung Lee & Dawoon Jeong & Jeong-Dong Lee, 2026. "Contrasting pathways of automation: routine task substitution vs. AI complementarity," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 13(1), pages 1-11, December.
    6. Kiran Tomlinson & Sonia Jaffe & Will Wang & Scott Counts & Siddharth Suri, 2025. "Working with AI: Measuring the Applicability of Generative AI to Occupations," Papers 2507.07935, arXiv.org, revised Oct 2026.
    7. Seth Gordon Benzell & Kyle R. Myers, 2026. "Automation Experiments and Inequality," NBER Working Papers 34668, National Bureau of Economic Research, Inc.
    8. Hiroyuki Yamada & Linda Agnes Kursim & Midori Matsushima & Atsushi Nakagomi & Takahiro Tabuchi, 2026. "The Impact of AI-Induced Job Replacement Anxiety on Work Motivation, Turnover Intention, and Mental Well-Being: Evidence from Japan," Keio-IES Discussion Paper Series DP2026-015, Institute for Economics Studies, Keio University.
    9. FUKAO, Kyoji & IKEUCHI, Kenta & NAGAYA, Yoshiaki & PERUGINI, Cristiano & POMPEI, Fabrizio, 2026. "Automation Risk, Innovative Capital, and Labour Market Outcomes : Evidence from Japan," CEI Working Paper Series 2026-03, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    10. Jensen, Mathias Fjællegaard & Schneider, Cédric, 2026. "Digital skill adoption and employment dynamics: Evidence from matched vacancy-employer–employee data," Research Policy, Elsevier, vol. 55(5).
    11. Ronald W. Jones, 2018. "Heckscher–Ohlin and Specific-Factors Trade Models for Finite Changes: How Different Are They?," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 8, pages 117-136, World Scientific Publishing Co. Pte. Ltd..
    12. Jones, Ronald W., 2010. "Art works in international trade theory," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 64-74, January.
    13. Yukun Zhang & Tianyang Zhang, 2026. "The Economics of Digital Intelligence Capital: Endogenous Depreciation and the Structural Jevons Paradox," Papers 2601.12339, arXiv.org.
    14. Georgios A. Tritsaris, 2025. "Occupational Tasks, Automation, and Economic Growth: A Modeling and Simulation Approach," Papers 2512.16261, arXiv.org, revised Dec 2025.
    15. Al khatib, Abdullah Mohammad Ghazi & Alshaib, Bayan Mohamad, 2026. "The heterogeneous effects of artificial intelligence on labor markets: A calibrated simulation of skills, tasks, and wages," International Review of Economics & Finance, Elsevier, vol. 108(C).
    16. Shreya Roy & Sugata Marjit & Bibek Ray Chaudhuri, 2022. "Role of Artificial Intelligence in Intra-Sectoral Wage Inequality in an Open Economy: A Finite Change Approach," CESifo Working Paper Series 9862, CESifo.
    17. Anabela Santos & Francesco Molica, 2026. "Institutional Context and the Employment Effects of Artificial Intelligence in European SMEs," Working Papers TIMES² 2026-082, ULB -- Universite Libre de Bruxelles.
    18. Nikolaos Charalampidis & Mananirina Razafitsiory, 2025. "Automation in an estimated small open economy model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(3), pages 1017-1043, August.
    19. Peeyush Agarwal & Harsh Agarwal & Akshat Rana, 2025. "What Work is AI Actually Doing? Uncovering the Drivers of Generative AI Adoption," Papers 2510.23669, arXiv.org, revised Oct 2025.
    20. Jeremy Yang & Kate Zyskowski & Noah Yonack & Jerry Ma, 2026. "How AI Agents Reshape Knowledge Work: Autonomy, Efficiency, and Scope," Papers 2606.07489, arXiv.org, revised Jun 2026.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_12800. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.