Artificial Intelligence, Structural Change and Labor Income Share

Guo Kaiming (郭凯明)*

Lingnan College, Sun Yat-sen University, Guangzhou, China

Abstract: Artificial intelligence (AI) is a strategic technology that leads a new round of technological revolution and structural transformation. This paper studies the effects of AI on structural change and factor income shares. As a general purpose technology and new infrastructure, AI may substitute either labor or capital and its application has differential prospects across sectors. With a multi-sector general dynamic equilibrium model, we find that AI services or AI-specific technologies will reallocate factors between sectors. The direction of the reallocation depends on sectoral differences in the output elasticity of AI and in the elasticity of substitution between AI and traditional modes of production. The process of structural change will in turn change the labor income share. This paper presents the theoretical conditions for the direction of these changes and the underlying economic mechanism. We derive policy implications about how to promote high-quality development with AI.

Keywords: artificial intelligence (AI), structural change, labor income share, new infrastructure

JEL Classification Code: O11, O14, O41

DOI: 10.19602/j.chinaeconomist.2021.11.06