Artificial Intelligence and Technological Unemployment

How large are the effects of artificial intelligence (AI) on labor productivity and unemployment? We develop a labor-search model of technological unemployment where AI learns from workers, raises productivity, and displaces them if renegotiation fails. The model admits three steady states: no AI; some AI with limited capability, more job creation but higher unemployment; unbounded AI with endogenous growth and employment gains. Calibrated to U.S. data, the model implies a threefold productivity gain but a 23% employment loss, half within five years. Plausible parameters give rise to global and local indeterminacy with endogenous cycles in productivity and unemployment, underscoring the uncertainty of AI's impacts in line with a wide range of empirical findings. Equilibria are inefficient despite the Hosios condition; subsidizing jobs at risk of AI displacement is constrained optimal.