Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263792 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9862
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Artificial Intelligence (AI) has the potential to significantly impact the income of individuals. Cross-country data shows that introduction of AI is inequality enhancing in developing and less developed countries. In this paper, we attempt to understand the reason for increase in wage inequality across labourers due to introduction of AI, in a finite change General Equilibrium (GE) set up which allows for emergence of a new activity. AI-induced technological shock is introduced in the non-traded sector of an open economy with heterogeneous skills. We show how the advent of AI (which was initially non-existent) in the non-traded sector separates the skills of the once homogenous workers, thus, creating an intra-sectoral wage gap. What proportion of the low-skilled workers can move to the higher wage paying sector depends on an adaptability factor that acts as an eligibility criterion in fragmenting the erstwhile homogenous labourers and also works towards rising intra-group wage gap.
Subjects: 
artificial intelligence
finite change
sectoral wage gap
JEL: 
O33
J31
D50
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.