The Skill Premium Across Countries in the Era of Industrial Robots and Generative AI

Marcos Ribeiro and Klaus Prettner

MPRA Paper from University Library of Munich, Germany

Abstract: How do new technologies affect economic growth and the skill premium? To answer this question, we analyze the impact of industrial robots and artificial intelligence (AI) on the wage differential between low-skill and high-skill workers across 52 countries using counterfactual simulations. In so doing, we extend the nested CES production function framework of Bloom et al. (2025) to account for cross-country income heterogeneity. Confirming prior findings, we show that the use of industrial robots tends to increase wage inequality, while the use of AI tends to reduce it. Our contribution lies in documenting substantial heterogeneity across income groups: the inequality-increasing effect of robots and the inequality-reducing effects of AI are particularly strong in high-income countries, while they are less pronounced among middle- and lower-middle income countries. In addition, we show that both technologies boost economic growth. In terms of policy recommendations, our findings suggest that investments in education and skill-upgrading can simultaneously raise average incomes and mitigate the negative effects of automation on wage inequality.

Keywords: Automation; Industrial; Robots; AI; Skill; premium (search for similar items in EconPapers)
JEL-codes: J31 O33 (search for similar items in EconPapers)
Date: 2025-04-28, Revised 2025-04-28
New Economics Papers: this item is included in nep-ain, nep-lma and nep-tid
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