Artificial Intelligence (AI) has the potential to reshape the global economy, especially in the realm of labor markets. Advanced economies will experience the benefits and pitfalls of AI sooner than emerging market and developing economies, largely due to their employment structure focused on cognitive-intensive roles. There are some consistent patterns concerning AI exposure, with women and college-educated individuals more exposed but also better poised to reap AI benefits, and older workers potentially less able to adapt to the new technology. Labor income inequality may increase if the complementarity between AI and high-income workers is strong, while capital returns will increase wealth inequality. However, if productivity gains are sufficiently large, income levels could surge for most workers. In this evolving landscape, advanced economies and more developed emerging markets need to focus on upgrading regulatory frameworks and supporting labor reallocation, while safeguarding those adversely affected. Emerging market and developing economies should prioritize developing digital infrastructure and digital skills.

Authors: Mauro Cazzaniga, Florence Jaumotte, Longji Li, Giovanni Melina, Augustus J. Panton, Carlo Pizzinelli, Emma Rockall, and Marina M. Tavares

Link: IMF SDN AI

Presenter

Marina M. Tavares is a Senior Economist in the Climate Change Structural Reforms Division of the International Monetary Fund (IMF) Research Department. Before joining RES, Marina led the working group on the interconnections between macroeconomic policy and inequality under FCDO-IMF Collaboration. Her research interests include macroeconomics, labor markets, AI, climate change, gender, and inequality. Before joining the Fund, Ms. Tavares worked as an assistant professor at Instituto Tecnologico Autonomo de Mexico (ITAM), and she holds a Ph.D. in Economics from the University of Minnesota.