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Artificial Intelligence and the Future of Work: Evidence and Policy Guidelines for Developing Economies

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  • Egana-delSol, Pablo

    (Adolfo Ibanez University)

  • Vargas-Faulbaum, Luis

    (Adolfo Ibanez University)

Abstract

This article offers a comprehensive review of Artificial Intelligence's (AI) effects on global labour markets, with a particular focus on developing economies. Drawing on an extensive body of evidence, it demonstrates that AI's disruptive potential diverges markedly from earlier waves of automation, extending its reach into occupations once deemed insulated - especially those demanding advanced education and complex cognitive abilities. The analysis reveals significant in AI exposure across countries at different development stages and among workers distinguished by skill sets, educational attainment, age, and gender, underscoring its unequal distributional consequences. To harness AI's benefits while safeguarding vulnerable groups, we propose four strategic policy levers: bolstering digital infrastructure, expanding vocational training and lifelong upskilling programmes, formalising labour markets, and integrating AI tools within social protection delivery. Collectively, these measures foster a human centred adoption of AI, bridge the digital divide, and promote inclusive growth, thereby mitigating adverse impacts on employment and wages.

Suggested Citation

  • Egana-delSol, Pablo & Vargas-Faulbaum, Luis, 2025. "Artificial Intelligence and the Future of Work: Evidence and Policy Guidelines for Developing Economies," IZA Policy Papers 216, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izapps:pp216
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • 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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