AI, Output, and Employment

Abstract

Does artificial intelligence (AI) increase productivity---and does it displace workers? We examine aggregate effects using administrative data covering essentially all U.S. employers in a difference-in-differences design exploiting occupational AI exposure across industries and states. A one standard deviation increase in exposure raises output by 7%, with effects emerging in 2021 when enterprise AI tools entered the market. Employment effects follow the same timing but diverge by exposure type: where AI likely requires human collaboration, employment rises 4%; where AI can perform tasks independently, we find no significant employment effect. Results are robust to  state-by-year and industry-by-year fixed effects and suggest AI has caused a decrease in the labor share of income.

Keywords: artificial intelligence, generative AI, labor market, employment, wages, output, productivity

JEL Classification: O33, J24, J23, E24, O47