AI-Driven Labor Substitution: Evidence from Google Translate and ChatGPT

60 Pages Posted: 17 Apr 2023 Last revised: 7 Jun 2023

See all articles by Erdem Dogukan Yilmaz

Erdem Dogukan Yilmaz

Erasmus Univeristy Rotterdam School of Management

Ivana Naumovska

INSEAD

Vikas A. Aggarwal

INSEAD - Entrepreneurship and Family Enterprise

Date Written: March 26, 2023

Abstract

Although artificial intelligence (AI) has the potential to significantly disrupt businesses across a range of industries, we have limited empirical evidence for its substitution effect on human labor. We use Google’s introduction of neural network-based translation (GNNT) in 2016-2017 as a natural experiment to examine the substitution of human translators by AI in the context of a large online labor market. Using a difference-in-differences design, we show that the introduction of GNNT reduced the number of (human translation) transactions at both the overall market and individual translator levels. In addition, we show that GNNT had a stronger effect on translation tasks with analytical elements, as compared to those with cultural and emotional elements. In supplemental analyses, we document a similar pattern after the launch of ChatGPT using question and answer patterns in Stack Exchange forums. Our study thus offers robust and causal empirical evidence for a heterogeneous substitution effect of human tasks by skilled knowledge workers. We discuss the relevance of our findings for research on competitive advantage, technology adoption, and strategy microfoundations.

Keywords: artificial intelligence, labor substitution, machine translation, ChatGPT

Suggested Citation

Yilmaz, Erdem Dogukan and Naumovska, Ivana and Aggarwal, Vikas A., AI-Driven Labor Substitution: Evidence from Google Translate and ChatGPT (March 26, 2023). INSEAD Working Paper No. 2023/24/EFE, Available at SSRN: https://ssrn.com/abstract=4400516 or http://dx.doi.org/10.2139/ssrn.4400516

Erdem Dogukan Yilmaz (Contact Author)

Erasmus Univeristy Rotterdam School of Management ( email )

Ivana Naumovska

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore

Vikas A. Aggarwal

INSEAD - Entrepreneurship and Family Enterprise ( email )

F-77305 Fontainebleau Cedex
France

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