AI and Freelancers: Has the Inflection Point Arrived?

Artificial intelligence (AI) has seen tremendous improvements in capabilities recently, yet how AI impacts different labor markets remains unclear. Leveraging the launch of ChatGPT, this study aims to elucidate how AI influences freelancers across different online labor markets (OLMs). Employing the Difference-in-Differences method, we discovered two distinct scenarios following ChatGPT’s launch: 1) displacement effects in translation & localization OLM, reducing freelancers’ work volume and earnings; 2) productivity effects in web development OLM, increasing freelancers’ work volume and earnings. Theoretically, we developed a Cournot competition model to explain and identify that an inflection point exists for each occupation. Before this point, human workers benefit from AI enhancements; beyond this point, human workers would be replaced. Additional analyses across various occupations consistently demonstrate the two scenarios caused by AI. Further investigation into the progression from ChatGPT 3.5 to 4.0 reveals three evolving patterns of AI’s effects, thereby reinforcing our inflection point conjecture.