Artificial intelligence and the skill premium

David E. Bloom; Klaus Prettner; Jamel Saadaoui; Mario Veruete

doi:10.1016/j.frl.2025.107401

Artificial intelligence and the skill premium

David E. Bloom
, Klaus Prettner
, Jamel Saadaoui
, Mario Veruete

Department of Economics (Prettner)

Publication: Scientific journal › Journal article › peer-review

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Abstract

How will ChatGPT and other forms of artificial intelligence (AI) affect the skill premium? To address this question, we propose a nested constant elasticity of substitution production function that distinguishes among three types of capital: traditional physical capital (machines, assembly lines), industrial robots, and AI. Following the literature, we assume that industrial robots predominantly substitute for low-skill workers, whereas AI mainly helps to perform the tasks of high-skill workers. We show that AI reduces the skill premium as long as it is more substitutable for high-skill workers than low-skill workers are for high-skill workers.

Original language	English
Pages (from-to)	107401
Journal	Finance Research Letters
Volume	81
DOIs	https://doi.org/10.1016/j.frl.2025.107401
Publication status	Published - 2025

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Cite this

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