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Artificial intelligence and the skill premium

Finance Research Letters, forthcoming.

12 Pages Posted: 17 Nov 2023 Last revised: 13 Apr 2025

See all articles by David E. Bloom

David E. Bloom

Harvard University - T.H. Chan School of Public Health; National Bureau of Economic Research (NBER)

Klaus Prettner

Vienna University of Economics and Business - Department of Economics

Jamel Saadaoui

Université Paris VIII Vincennes-Saint-Denis

Mario Veruete

Quantum Datalab

Multiple version iconThere are 4 versions of this paper

Date Written: October 19, 2023

Abstract

What will likely be the effect of the emergence of ChatGPT and other forms of artificial intelligence (AI) on the skill premium? To address this question, we develop a nested constant elasticity of substitution production function that distinguishes between industrial robots and AI. Industrial robots predominantly substitute for low-skill workers, whereas AI mainly helps to perform the tasks of high-skill workers. We show that AI reduces the skill premium as long as it is more substitutable for high-skill workers than low-skill workers are for high-skill workers.

Keywords: Automation, Artificial Intelligence, ChatGPT, Skill Premium, Wages, Productivity.

JEL Classification: J30, O14, O15, O33.

Suggested Citation

Bloom, David E. and Prettner, Klaus and Saadaoui, Jamel and Veruete, Mario, Artificial intelligence and the skill premium (October 19, 2023). Finance Research Letters, forthcoming., Available at SSRN: https://ssrn.com/abstract=4607353 or http://dx.doi.org/10.2139/ssrn.4607353

David E. Bloom

Harvard University - T.H. Chan School of Public Health ( email )

677 Huntington Avenue
Boston, MA MA 02115
United States
617-432-0654 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Klaus Prettner

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

Jamel Saadaoui (Contact Author)

Université Paris VIII Vincennes-Saint-Denis ( email )

2 rue de la Liberté
Saint-Denis, 93200
France

Mario Veruete

Quantum Datalab ( email )

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