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The Macroeconomic Effect of AI: Sizing the Software Engineering Channel

Author

Listed:
  • Alex Blumenfeld
  • Jonathon Hazell
  • Chen Lian
  • Andreas Schaab

Abstract

We measure how artificial intelligence (AI) affects the economy through its impact on software engineering productivity. We use information from financial markets to develop a forward-looking measure that is available in real time. We estimate the sensitivity of each firm’s stock return to an AI stock market index, and how this sensitivity depends on the share of firm payroll in software engineering. We use a model to map this cross-sectional relationship into software engineering productivity gains. From November 2022 to December 2025, AI increased the market’s expected present value of software engineering productivity by the equivalent of a permanent 32.6% productivity increase. The corresponding effect on the level of GDP is 3.6% in the baseline and 6.5% when higher software engineering productivity also raises R&D productivity. By mid-2026, amid rapid progress in coding agents, the effect of AI on productivity and GDP had more than doubled relative to the end of 2025.

Suggested Citation

  • Alex Blumenfeld & Jonathon Hazell & Chen Lian & Andreas Schaab, 2026. "The Macroeconomic Effect of AI: Sizing the Software Engineering Channel," NBER Working Papers 35793, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35793
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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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