The skill premium across countries in the era of industrial robots and artificial intelligence

Abstract

How do new technologies affect economic growth and the skill premium? To answer this question, we analyze the impacts of industrial robots and artificial intelligence (AI) across 52 countries using counterfactual simulations. In so doing, we simulate the nested CES production function framework of Bloom et al. (2025) with low-skilled workers, high-skilled workers, traditional capital, robots, and AI. Our contribution lies in documenting substantial heterogeneity across income groups: the inequality-increasing effect of robots and the inequality-reducing effect of AI are particularly strong in high-income countries, while they are less pronounced among upper-middle and lower-middle income countries. In addition, we show that both technologies boost economic growth. In terms of policy recommendations, our framework suggests i) balanced investment in both types of automation technologies to increase economic growth while keeping wage inequality subdued, and ii) investments in education and skill-upgrading to mitigate negative effects of robot use on wage inequality.