A study by economists Iñaki Aldasoro, Sebastian Doerr, Leonardo Gambacorta and Daniel Rees suggests that an industry's direct exposure to artificial intelligence has surprisingly little impact on its long-term outcomes, despite AI being a permanent driver of higher productivity.
“We find that a sector’s initial exposure to AI has little correlation with its long-term increase in output,” they note.
The reason is that, ultimately, general equilibrium effects arising from higher demand for a sector’s output
matter much more than the initial increase in productivity,” they say. In other words, the level of customer demand for any class of products matters more.
So the following illustration of industry growth does not primarily reflect the impact of AI.
source: Bank for International Settlements
The authors do argue that the primary AI impact will be on jobs and occupations with more cognitively demanding tasks.
Even the effects of AI on inflation are uncertain, they argue. On one hand, by raising productivity, AI adoption boosts supply, which is disinflationary. On the other hand, firms need to make substantial investments to take full advantage of AI, which could contribute to higher inflation.
Since inflation responses hinge on expectations, much depends on households’ and firms’ anticipation of the impact of AI. If they do not anticipate higher future productivity, AI adoption is initially disinflationary.
In contrast, when households and firms anticipate higher future productivity, inflation rises immediately.
And that is the rub. If virtually everybody expects AI will boost productivity, then expectations related to inflation also will tend to rise.
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