The Effects of Artificial Intelligence on Jobs: Evidence from an AI Subsidy Program

• In Event: Taxation and Innovation

Abstract

Artificial intelligence (AI) is expected to reshape labor markets, yet causal evidence on its effects remains limited. We exploit a novel Swedish subsidy program that encouraged small- and mid-sized firms to begin adopting AI. Using a synthetic difference-in-differences design, we compare awarded and non-awarded firms. We find that AI subsidies led to a sustained increase in job postings over five years, without affecting overall employment. These effects reflect broad-based hiring in both AI and non-AI occupations, consistent with AI mainly complementing rather than substituting labor. Our results align with task-based models of automation, in which AI adoption reconfigures work and spurs demand across roles. They also highlight that even modest policy interventions can trigger meaningful labor market responses when paired with complementary investment. We provide the first quasi-experimental evidence on medium-run occupational effects of firm-level AI engagement, underscoring the value of targeted support for inclusive technological transitions.

Author

• Shantanu Khanna, s.khanna@northeastern.edu