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Will this time be different? A review of the literature on the Impact of Artificial Intelligence on Employment, Incomes and Growth

Bertin Martens () and Songuel Tolan

No 2018-08, JRC Working Papers on Digital Economy from Joint Research Centre

Abstract: There is a long-standing economic research literature on the impact of technological innovation and automation in general on employment and economic growth. Traditional economic models trade off a negative displacement or substitution effect against a positive complementarity effect on employment. Economic history since the industrial revolution as strongly supports the view that the net effect on employment and incomes is positive though recent evidence points to a declining labour share in total income. There are concerns that with artificial intelligence (AI) "this time may be different". The state-of-the-art task-based model creates an environment where humans and machines compete for the completion of tasks. It emphasizes the labour substitution effects of automation. This has been tested on robots data, with mixed results. However, the economic characteristics of rival robots are not comparable with non-rival and scalable AI algorithms that may constitute a general purpose technology and may accelerate the pace of innovation in itself. These characteristics give a hint that this time might indeed be different. However, there is as yet very little empirical evidence that relates AI or Machine Learning (ML) to employment and incomes. General growth models can only present a wide range of highly diverging and hypothetical scenarios, from growth implosion to an optimistic future with growth acceleration. Even extreme scenarios of displacement of men by machines offer hope for an overall wealthier economic future. The literature is clearer on the negative implications that automation may have for income equality. Redistributive policies to counteract this trend will have to incorporate behavioural responses to such policies. We conclude that that there are some elements that suggest that the nature of AI/ML is different from previous technological change but there is no empirical evidence yet to underpin this view.

Keywords: labour markets; employment; technological change; task-based model; artificial intelligence; income distribution (search for similar items in EconPapers)
JEL-codes: J62 O33 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-08
New Economics Papers: this item is included in nep-big, nep-gro, nep-ino and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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