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When the Middle Class Undermines Progress: The Political Economy of AI Regulation

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  • Denisenko, Anna
  • Sonin, Konstantin

Abstract

The classic literature argues that a large middle class is a prerequisite for economic development. Is this true when AI progress threatens to disrupt the labor market? On the one hand, uncertainty about the consequences can impede the passage of AI-friendly regulation: voters fear the prospect of losing when the uncertainty is resolved. On the other, granular information about reform consequences may reduce political support as well. In our model, a larger middle class hampers reform, compensatory redistribution is most politically effective when its welfare justification is weakest, and AI regulatory sandboxes encounter resistance because new information undermines reform coalitions.

Suggested Citation

  • Denisenko, Anna & Sonin, Konstantin, 2026. "When the Middle Class Undermines Progress: The Political Economy of AI Regulation," CEPR Discussion Papers 21888, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21888
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    File URL: https://cepr.org/publications/DP21888
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    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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