Artificial intelligence and the skill premium

David E. Bloom, Klaus Prettner, Jamel Saadaoui and Mario Veruete

Finance Research Letters, 2025, vol. 81, issue C

Abstract: How will 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.

Keywords: Automation; Artificial intelligence; ChatGPT; Skill premium; Wages; Productivity (search for similar items in EconPapers)
JEL-codes: J30 O14 O15 O33 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: Artificial Intelligence and the Skill Premium (2024)
Working Paper: Artificial Intelligence and the Skill Premium (2024)
Working Paper: Artificial intelligence and the skill premium (2023)
Working Paper: Artificial intelligence and the skill premium (2023)
Working Paper: Artificial intelligence and the skill premium (2023)
Working Paper: Artificial intelligence and the skill premium (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325006610

DOI: 10.1016/j.frl.2025.107401

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