The Impacts of AI, Robots, and Globalization on the Labor Market: Analysis of a Quantitative General Equilibrium Trade Model; Taiji Furusawa (University of Tokyo)

Abstract

We analyze the impact of robots and AI on the labor market in the world economy, in which industries and countries are linked with each other through the global value chain (GVC). To this end, we build a multi-country, multi-product, multi-factor, general equilibrium trade model, in which goods are produced from capital, intermediate inputs, and two types of tasks: one that can be performed either by low-skilled labor or robots, and the other by high-skilled workers or AI. We estimate model parameters and conduct the analysis, in which we simulate the counterfactual world economy in 2014 where robot technology and international trade costs are at their 1993 levels and compare it with the actual 2014 economy. We find that the robot technology effect on the labor market is much smaller than the trade liberalization effect, although it is sizable in some industries that are most affected.  Robot installation indeed affects low-skilled workers adversely in some countries, but affect them favorably in many other countries, suggesting that the productivity effect of robot installation is rather significant. In addition, robot installation uniformly increases the real wage rate for high-skilled workers, and hence increases the skill premium in all countries in our sample. We also conduct the counterfactual analysis, in which the robot productivity and the TFP of the robot production both become five-fold the 2014 level, in order to assess future impacts of robots on the labor market.  We also conduct similar analysis for the impact of AI and find similar effects, except that it is the low-skilled workers that mostly benefit from AI.