How Artificial Intelligence Technology Affects Productivity and Employment: Firm-level Evidence from Taiwan

The effects of the rapid development of artificial intelligence (AI), a general-purpose technology, on firm performance is an emerging and crucial issue. This study examines the impact of AI technology on firms’ productivity and employee profiles. We use the keyword-matching method to parse the text of Taiwan patent grants, and obtain matched firm-level data on AI innovations in Taiwan's electronics industry for the 2002–2018 period. Empirical estimations indicate that AI technology is positively associated with productivity and employment. Meanwhile, non-AI patents also generate pro-productivity and pro-employment effects with a magnitude similar to that of AI technology. Inventing AI technologies crucially alters firms’ workforce compositions, which reduce the share of labor force with educational qualifications of college level and below. Robustness checks reaffirm these findings.