"Does artificial intelligence affect the pattern of skill demand? Evidence from Chinese manufacturing firms"

by Xie, Mengmeng; Ding, Lin; Xia, Yan; Guo, Jianfeng; Pan, Jiaofeng; Wang, Huijuan (2021)

Abstract

In view of the recent penetration of artificial intelligence (AI) into production activities, we undertake a quasi-natural experiment to identify its impact on employment at different skill levels using micro-enterprise data from Chinese manufacturing during 2011–2017. Employing a robust difference-in-differences method with propensity score matching, we investigate the heterogeneous impact of AI adoption upon different skills across three dimensions — geographical regions, enterprise types, and the length of time since the adoption of AI. We find that AI reduces the relative demand for low-skilled labor across all regions in China, while increasing the relative demand for high-skilled labor only in the eastern region. These differential impacts of AI upon relative demand for different skills reflect firm-level technological intensity. Results also show that the longer the duration of AI use, the greater is the impact upon the relative demand for high-skilled labor.

Key Passage

The results of the empirical analysisdemonstrate that AI has a strong impact upon relative skill demand. First, AI adoption in Chinese manufacturingfirms reduces the relative demandfor low-skilled labor by twice as much as it increases the relative demandfor high-skilled labor, and the longer the time since the adoption of AI,the greater the impact upon the relative demand for skills.  (p.303)

Keywords

Artificial Intelligence, Skill Demand, Heterogeneity Analysis, Robust Did, China Manufacturing

Themes

Skills, Automation

Links to Reference

• https://www.sciencedirect.com/science/article/pii/S0264999321000171
• http://dx.doi.org/10.1016/j.econmod.2021.01.009
• https://www.sciencedirect.com/science/article/pii/S0264999321000171?casa_token=MKeibz3PiV0AAAAA:Y8VM7xnBhp69tG_L5kjgSp_w7Veoq860LQ8I_5tlaxTNK-Bkx9dxTZT_sjmJ13m2ZSLaYxX2

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