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Artificial Intelligence and the Skill Premium

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  • Bloom, David E.

    (Harvard School of Public Health)

  • Prettner, Klaus

    (Vienna University of Economics and Business)

  • Saadaoui, Jamel

    (Université de Strasbourg)

  • Veruete, Mario

    (Quantum DataLab)

Abstract

How will the emergence of ChatGPT and other forms of artificial intelligence (AI) affect the skill premium? To address this question, we propose a nested constant elasticity of substitution production function that distinguishes among three types of capital: traditional physical capital (machines, assembly lines), industrial robots, and AI. Following the literature, we assume that industrial robots predominantly substitute for low-skill workers, whereas AI mainly helps to perform the tasks of high-skill workers. We show that AI reduces the skill premium as long as it is more substitutable for high-skill workers than low-skill workers are for high-skill workers.

Suggested Citation

  • Bloom, David E. & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2024. "Artificial Intelligence and the Skill Premium," IZA Discussion Papers 16972, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16972
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    Cited by:

    1. Christina Gathmann & Felix Grimm & Erwin Winkler, 2024. "AI, Task Changes in Jobs, and Worker Reallocation," CESifo Working Paper Series 11585, CESifo.
    2. Schetter, Ulrich & Schneider, Maik T. & Jäggi, Adrian, 2024. "Inequality, openness, and growth through creative destruction," Journal of Economic Theory, Elsevier, vol. 222(C).
    3. Barros, Fernando & Delalibera, Bruno & Ribeiro, Marcos, 2025. "Economic Complexity and Robot Adoption," MPRA Paper 125125, University Library of Munich, Germany, revised 01 Jun 2025.
    4. Minniti, Antonio & Prettner, Klaus & Venturini, Francesco, 2025. "AI innovation and the labor share in European regions," European Economic Review, Elsevier, vol. 177(C).
    5. Ikeshita, Kenichiro, 2025. "Effects of automation and human investment on skill premium," Innovation and Green Development, Elsevier, vol. 4(2).

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    Keywords

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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