AI Adoption and Inequality

Emma Rockall, Marina Mendes Tavares and Carlo Pizzinelli

No 2025/068, IMF Working Papers from International Monetary Fund

Abstract: There are competing narratives about artificial intelligence’s impact on inequality. Some argue AI will exacerbate economic disparities, while others suggest it could reduce inequality by primarily disrupting high-income jobs. Using household microdata and a calibrated task-based model, we show these narratives reflect different channels through which AI affects the economy. Unlike previous waves of automation that increased both wage and wealth inequality, AI could reduce wage inequality through the displacement of high-income workers. However, two factors may counter this effect: these workers’ tasks appear highly complementary with AI, potentially increasing their productivity, and they are better positioned to benefit from higher capital returns. When firms can choose how much AI to adopt, the wealth inequality effect is particularly pronounced, as the potential cost savings from automating high-wage tasks drive significantly higher adoption rates. Models that ignore this adoption decision risk understating the trade-off policymakers face between inequality and efficiency.

Keywords: Artificial intelligence; Employment; Inequality (search for similar items in EconPapers)
Pages: 65
Date: 2025-04-04
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