AI and Human Capital Accumulation: Aggregate and Distributional Implications

Yang K. Lu and Eunseong Ma
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Yang K. Lu: Hong Kong University of Science and Technology

No 2026rwp-290, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper investigates how human capital responses to anticipated advances in artificial intelligence (AI) reshape aggregate and distributional consequences of AI. We develop an incomplete-markets model with endogenous human capital and asset accumulation in general equilibrium, featuring three skill sectors and uninsurable idiosyncratic risk. AI enters as an anticipated, sector-biased shock that narrows middle-skill wage premiums and boosts returns to top expertise. We find that human capital responses to AI (i) drive voluntary job polarization, shifting workers from the middle toward both lower and higher skill sectors; (ii) magnify AI's positive effects on aggregate output and consumption, while dampening its impact on employment; and (iii) alter inequality: even as polarization increases disparities in income and consumption, precautionary saving by middle-sector households reduces the rise in wealth inequality. In an extension (AI+), where AI raises the human-capital threshold for high-skill jobs, additional training and saving become concentrated among high-sector households, further increasing wealth inequality.

Keywords: AI; Human Capital; Job Polarization; Inequality (search for similar items in EconPapers)
Pages: 44pages
Date: 2026-04
New Economics Papers: this item is included in nep-ain and nep-dge
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