Portuguese Workforce Exposure to Artificial Intelligence and Automation: An analysis of firm productivity

Details

Supervisors

Belleflamme, Paul ; Hugo Castro Silva

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

enDigital technologies have a growing relevance in society; in this context, this dissertation investigates the impact of digitalization technologies, specifically AI and automation, on Portuguese firm productivity, using an employer-employee matched longitudinal dataset and economic and financial data on all private Portuguese firms, from 2017 to 2021. Digitalization technologies are divided into two categories, comprising its dual effects: destructive digitalization is studied with the exposure metric of Frey and Osborne (2017), which estimates occupations’ probability of automation (e.g., replacement of human-performed tasks); transformative digitalization is measured through the exposure metric of Felten et al. (2021), which assesses workforce exposure to AI (e.g., labor-augmenting technologies that enhance worker efficiency). Three distinct measures are used to aggregate occupational exposure at the firm-level: percentage of workers highly exposed to digitalization, average exposure of the workforce to digitalization; and percentage of workers across high, medium, and low digitalization exposure levels. Productivity is assessed with multiple indicators, including Labor Productivity, Turnover per worker, and Total Factor Productivity (use of Ackerberg et al.’s (2015) method to account for endogeneity). Implementing Fixed Effects methods, we find that high AI exposure is connected to enhanced levels of productivity, indicating that AI mostly likely increases workers’ and firms’ productivity. On the contrary, workforce exposure to automation seems to marginally decrease productivity; interaction effects further suggest that AI’s productivity gains are diminished in firms with higher automation exposure. Our findings highlight the importance of corporate digital integration, also stressing the relevance of high levels of education and digital literacy to grasp productivity effects. This research offers valuable insights for policy makers in Portugal, so that efficient policies can be adopted to maximize digitalization’s benefits and boost Portugal’s economic growth.