Information Technology and Firm Employment
50 Pages Posted: 13 Apr 2019 Last revised: 11 Jun 2020
Date Written: May 1, 2020
Do firms displace labor with new information technologies such as “artificial intelligence”? It is challenging to distinguish the effects of technology adoption from unobserved productivity and demand shocks. We take a first look at the economic impacts of large custom software investment —“IT spikes”—using a novel methodology to obtain consistent estimates. Following these events, firm employment increases by about 7% and revenues by about 11%. Rather than displace labor, IT spikes increase revenues and markups, implying decreased labor share of output. Moreover, growth is greater for firms that use AI, IT-producing firms, newer firms, and those in the trade, service, and financial sectors.
Keywords: Iinformation Technology, Artificial Intelligence, Firm Productivity, Employment Growth, Firm Growth, Labor Share, Markups
JEL Classification: D22, J21, O33
Suggested Citation: Suggested Citation