Will This Time Be Different? A Review of the Literature on the Impact of Artificial Intelligence on Employment, Incomes and Growth

JRC Digital Economy Working Paper 2018-08

25 Pages Posted: 19 Dec 2018 Last revised: 13 Feb 2019

See all articles by Bertin Martens

Bertin Martens

Joint Research Centre

Songül Tolan

Joint Research Center of the European Commission

Date Written: November 26, 2018

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 well as more recent evidence strongly supports the view that the net effect on employment and incomes is positive. Still, there are concerns that with AI "this time may be different". State-of-the-art economic models for predicting the impact of AI on occupations make it different by design, by emphasizing the labour substitution effects of this new type of technology. The task-based model creates an environment where humans and machines compete for the completion of work-related tasks. 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 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: artificial intelligence, labour markets, employment, growth, income distribution

JEL Classification: O620, L330

Suggested Citation

Martens, Bertin and Tolan, Songül, Will This Time Be Different? A Review of the Literature on the Impact of Artificial Intelligence on Employment, Incomes and Growth (November 26, 2018). JRC Digital Economy Working Paper 2018-08. Available at SSRN: https://ssrn.com/abstract=3290708 or http://dx.doi.org/10.2139/ssrn.3290708

Bertin Martens (Contact Author)

Joint Research Centre ( email )

Edificio Expo, C
Inca Garcilaso, s/n
Sevilla, E-41092
Spain

Songül Tolan

Joint Research Center of the European Commission ( email )

Sevilla
Spain

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