Enrique Ide, IESE

Paper: Artificial Intelligence in the Knowledge Economy

Abstract: How does Artificial Intelligence (AI) affect the organization of work? We incorporate AI into an economy where humans endogenously sort into hierarchical firms: Less knowledgeable agents become “workers” (execute routine tasks), while more knowledgeable agents become “managers” (specialize in problem-solving). We model AI as an algorithm that uses capital (“computing power”) to mimic the behavior of humans with a given knowledge. AI leads to major reorganizations, affecting occupational choice, wages, and the size and productivity of firms. By explicitly incorporating the endogenous organization of knowledge, our results provide new insights into the effects of AI on the future of work.