Working Paper BETA #2023-37

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Title : Artificial intelligence and the skill premium

Author(s) : David E. Bloom, Klaus Prettner, Jamel Saadaoui, Mario Veruete

Abstract : What will likely be the effect of the emergence of ChatGPT and other forms of artificial intelligence (AI) on the skill premium? To address this question, we develop a nested constant elasticity of substitution production function that distinguishes between industrial robots and AI. 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.

Key-words : Automation, Artificial Intelligence, ChatGPT, Skill Premium, Wages, Productivity.

JEL Classification : J30, O14, O15, O33