Artificial Intelligence or Intelligence Augmentation? Unravelling the Debate through an Industry-Level Analysis

The tenet of artificial intelligence (AI) is to use machines to replace humans in performing tasks while the conviction of intelligence augmentation (IA) is to use machines to assist and enhance humans in performing tasks. This study examines whether information technology (IT) substitutes for or complements human labor in the production process. It argues that the relationship between IT and human labor is more nuanced than what has been conceptualized in literature — IT not only can substitute for human labor (the AI effect) but also can complement it (the IA effect); the exact nature depends on the tasks to be performed and the education levels of the employees. We test these predictions using an industry-level dataset covering 60 US industries from 1998 to 2013. Elasticity of substitution and organizational complementarity theory are adopted to examine the substitution/complementarity relationship between IT and labor with different levels of education. The findings reveal co-existence of the AI and the IA effects during the sample period, and that education plays a critical role for workers to benefit from the massive adoption of IT by the US industries.

[1]  Erik Brynjolfsson,et al.  Complementarity in Organizations , 2012 .

[2]  P. Samuelson.  Complementarity-An Essay on the 40th Anniversary of the Hicks-Allen Revolution in Demand Theory , 1974 .

[3]  B. R. Nault,et al.  Investments in Information Technology: Indirect Effects and Information Technology Intensity , 2006 .

[4]  Prasanna Tambe.  Big Data Investment, Skills, and Firm Value , 2014, Manag. Sci..

[5]  J. R. Bjerklie.  The end of work—The decline of the global labor force and the dawn of the post-market era, , 1996 .

[6]  B. R. Nault,et al.  Emergent Themes in the Interface Between Economics of Information Systems and Management of Technology , 2016 .

[7]  Kenneth L. Kraemer,et al.  Information Technology and Productivity in Developed and Developing Countries , 2013, J. Manag. Inf. Syst..

[8]  Chiara Francalanci,et al.  Information Technology and Worker Composition: Determinants of Productivity in the Life Insurance Industry , 1998, MIS Q..

[9]  Prasanna Tambe,et al.  The Extroverted Firm: How External Information Practices Affect Innovation and Productivity , 2012, Manag. Sci..

[10]  Lawrence F. Katz,et al.  Computing Inequality: Have Computers Changed the Labor Market? , 1997 .

[11]  J. C. R. Licklider,et al.  Man-Computer Symbiosis , 1960 .

[12]  R. Robert Russell,et al.  Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities) , 1989 .

[13]  Paul Beaudry,et al.  The Great Reversal in the Demand for Skill and Cognitive Tasks , 2013, Journal of Labor Economics.

[14]  P. Douglas,et al.  The Theory of Wages , 1934 .

[15]  J. Van Reenen,et al.  Has ICT Polarized Skill Demand? Evidence from Eleven Countries over Twenty-Five Years , 2014, Review of Economics and Statistics.

[16]  Erik Brynjolfsson,et al.  Race against the machine : how the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy , 2011 .

[17]  Lawrence F. Katz,et al.  The Origins of Technology-Skill Complementarity , 1996 .

[18]  S. Pinker.  The language instinct : how the mind creates language , 1995 .

[19]  M. Kremer,et al.  The O-Ring Theory of Economic Development , 1993 .

[20]  E. Brynjolfsson,et al.  Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending , 1996 .

[21]  Lorin M. Hitt,et al.  Information Technology and Firm Boundaries: Evidence from Panel Data , 1999, Inf. Syst. Res..

[22]  Martin Ford.  Could artificial intelligence create an unemployment crisis? , 2013, CACM.

[23]  A. Manning.  We Can Work it Out: The Impact of Technological Change on the Demand for Low-Skill Workers , 2004 .

[24]  E. Brynjolfsson,et al.  Beyond Computation: Information Technology, Organizational Transformation and Business Performance , 2000 .

[25]  Ernst R. Berndt,et al.  High-Tech Capital Formation and Labor Composition in U.S. Manufacturing Industries: An Exploratory Analysis , 1992 .

[26]  Ronald,et al.  Does Technological Progress Alter the Nature of Information Technology as a Production Input? New Evidence and New Results , 2010 .

[27]  T. Davenport.  Competing on analytics. , 2006, Harvard business review.

[28]  Chung-ki Min,et al.  The substitution of information technology for other factors of production: a Firm Level Analysis , 1997 .

[29]  William J. Baumol,et al.  American Economic Association Macroeconomics of Unbalanced Growth : The Anatomy of Urban Crisis , 2007 .

[30]  John Bound,et al.  Changes in the Structure of Wages During the 1980&Apos;S: an Evaluation of Alternative Explanations , 1989, The American economic review.

[31]  Richard J. Murnane,et al.  The New Division of Labor: How Computers Are Creating the Next Job Market , 2004 .

[32]  Lorin M. Hitt,et al.  Productivity, Business Profitability, and Consumer Surplus: Three Different Measures of Information Technology Value , 1996, MIS Q..

[33]  David Autor,et al.  Skills, Tasks and Technologies: Implications for Employment and Earnings , 2010 .

[34]  DewanSanjeev,et al.  The Substitution of Information Technology for Other Factors of Production , 1997 .

[35]  Robots and Jobs: Evidence from US Labor Markets , 2017, Journal of Political Economy.

[36]  Daron Acemoglu,et al.  Robots and Jobs: Evidence from US Labor Markets , 2017, Journal of Political Economy.

[37]  Erik Brynjolfsson,et al.  Three-Way Complementarities: Performance Pay, Human Resource Analytics, and Information Technology , 2012, Manag. Sci..

[38]  B. R. Nault,et al.  Information Technology Substitution Revisited , 2013 .

[39]  Richard J. Murnane,et al.  Upstairs, Downstairs: Computers and Skills on Two Floors of a Large Bank , 2001 .

[40]  K. Kraemer,et al.  : Evidence from , 2022 .

[41]  Uwe Deichmann,et al.  World development report 2016: Digital dividends , 2016 .

[42]  H. Uzawa,et al.  Production Functions with Constant Elasticities of Substitution , 1962 .