Affiliation:
1. Economic Forecasting Team, Reserve Bank of New Zealand Wellington New Zealand
2. Department of Economics University of Otago Dunedin New Zealand
Abstract
AbstractWe construct a three‐level constant elasticity of substitution production model. Labour is split into three components: (i) low‐skilled labour, (ii) high‐skilled labour with a traditional education background, and (iii) high‐skilled labour with an AI‐based education background. Rising use of automation in production will cause a rise in the skill premium (wages of both types of high‐skilled workers relative to low‐skilled workers) and AI skill premium (wages of high‐skilled labour with an AI‐based education relative to those with a traditional education background). Dependent on the value of the elasticity, automation may favour high‐skilled workers with an AI‐based education background.