Artificial intelligence, wage dynamics, and inequality: Empirical evidence from Chinese listed firms

Yongqiu Wu, Zhiwei Lin, Qingcui Zhang and Wei Wang

International Review of Economics & Finance, 2024, vol. 96, issue PC

Abstract: The impact of artificial intelligence (AI) on employment has attracted widespread attention, but the literature has generally viewed AI as a continuation of automation, arguing that technology will result in wage polarization. However, existing literature overlooks the unique aspects of AI technology. This study proposes new theoretical mechanisms and AI measure method to estimate the impacts of AI on wage dynamics and inequality. Based on an empirical study of data from listed companies in China from 2014 to 2022, we find that AI applications raise wages through three mechanisms: productivity improvement, crowding out low-wage routine jobs, and creating high-wage creative and social jobs. While executive pay does not increase because of AI applications, the pay for regular employees increases through job restructuring. Ultimately, AI applications narrow wage inequality between executives and regular employees. This study provides a new quantitative evaluation method for assessing AI progress. It also reveals the unique mechanisms of AI on firms' wage distribution, which differs from that of traditional technologies. These findings deepen our understanding of the complex relationship between AI development and wage changes.

Keywords: Artificial intelligence; Wage dynamics; Inequality; Listed firms (search for similar items in EconPapers)
JEL-codes: E24 O16 O33 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pc:s1059056024007317

DOI: 10.1016/j.iref.2024.103739

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