AI revolution and coordination failure: Theory and evidence

ÜNVEREN B., DURMAZ T., SUNAL S.

Journal of Macroeconomics, cilt.78, 2023 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 78
  • Basım Tarihi: 2023
  • Doi Numarası: 10.1016/j.jmacro.2023.103561
  • Dergi Adı: Journal of Macroeconomics
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Public Affairs Index
  • Anahtar Kelimeler: Artificial Intelligence, Automation, Inequality, Multiple equilibria
  • Yıldız Teknik Üniversitesi Adresli: Evet

Özet

This paper analyzes theoretically and empirically the coordination failure problem inherent within the 21st-century automation revolution. First, we build a general equilibrium model with labor-saving artificial intelligence (AI) technology that is developed through R&D investments in automation. The model exhibits multiple market equilibria due to a positive feedback loop between AI investments and general economic activities. The available evidence supports our model's predictions regarding the interaction between AI technologies, income inequality, and wages. We also find strong empirical support for multiple equilibria in AI development—the primary prediction of our model. These empirical and theoretical results suggest that AI development can cause coordination failures, thereby creating leaders and followers in automation. However, according to our policy analysis, R&D subsidies and public-private partnerships are efficient coordination devices to tackle this problem.