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AI Adoption, Productivity and Employment: Evidence from European Firms

Author

Listed:
  • Aldasoro, Inaki
  • Gambacorta, Leonardo
  • Pál, Rozália
  • Revoltella, Debora
  • Weiss, Christoph
  • Wolski, Marcin

Abstract

This paper provides new evidence on how the adoption of artificial intelligence (AI) affects productivity and employment in Europe. Using matched EIBIS-ORBIS data on more than 12,000 non-financial firms in the European Union (EU) and United States (US), we instrument the adoption of AI by EU firms by assigning the adoption rates of US peers to isolate exogenous technological exposure. Our results show that AI adoption increases the level of labor productivity by 4%. Productivity gains are due to capital deepening, as we find no adverse effects on firm-level employment. This suggests that AI increases worker output rather than replacing labor in the short run, though longer-term effects remain uncertain. However, productivity benefits of AI adoption are unevenly distributed and concentrate in medium and large firms. Moreover, AI-adopting firms are more innovative and their workers earn higher wages. Our analysis also highlights the critical role of complementary investments in software and data or workforce training to fully unlock the productivity gains of AI adoption.

Suggested Citation

  • Aldasoro, Inaki & Gambacorta, Leonardo & Pál, Rozália & Revoltella, Debora & Weiss, Christoph & Wolski, Marcin, 2026. "AI Adoption, Productivity and Employment: Evidence from European Firms," CEPR Discussion Papers 21082, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21082
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    Cited by:

    1. is not listed on IDEAS
    2. Nuriye Melisa Bilgin & Gianmarco Ottaviano, 2026. "AI unbound: digital infrastructure, AI adoption, and firm performance," CEP Discussion Papers dp2172, Centre for Economic Performance, LSE.
    3. Bick, Alexander & Blandin, Adam & Deming, David & Fuchs-Schündeln, Nicola & Jessen, Jonas, 2026. "Mind the Gap: AI Adoption in Europe and the US," IZA Discussion Papers 18521, IZA Network @ LISER.
    4. Tiziano Ropele & Alex Tagliabracci, 2026. "The economic impact of artificial intelligence: evidence from Italian firms," Questioni di Economia e Finanza (Occasional Papers) 1005, Bank of Italy, Economic Research and International Relations Area.
    5. James Lennox & Janine Dixon, 2026. "Occupations, Tasks and Generative AI: A Computable General Equilibrium Analysis," Centre of Policy Studies/IMPACT Centre Working Papers g-367, Victoria University, Centre of Policy Studies/IMPACT Centre.

    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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