AI, firms and wages: Evidence from India
62 Pages Posted: 8 Nov 2021
Date Written: November 6, 2021
We examine the impact of the deployment of artificial intelligence (AI) on hiring and wages in firms in the service sector using a novel dataset of 15 million vacancy posts from India's largest jobs website. We first document a rapid rise in demand for AI skills since 2016, particularly in the IT, finance and professional services industries. Vacancies demanding AI skills list substantially higher wages, but require more education and are highly concentrated in the largest firms and a small number of high-tech clusters. Exploiting plausibly exogenous variation in exposure to advances in the capabilities of AI, we then examine the impacts of establishment demand for AI skills, as a proxy for AI adoption. We find that growth in AI demand has a direct negative impact on the growth of non-AI and total job posts by incumbent firms, and reduces the growth of both average wage offers and wage offers for all but the lowest paid roles.
Keywords: artificial intelligence, labour markets, wages, development
JEL Classification: J23, O33
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