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AI innovation and the labor share in European regions

Antonio Minniti, Klaus Prettner A, Francesco Venturini · European Economic Review · 16 May 2025

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Abstract

This paper examines how the development of Artificial Intelligence (AI) affects the distribution of income between capital and labor, and how these shifts contribute to regional income inequality. To investigate this issue, we analyze data from European regions dating back to 2000. We find that for every doubling of regional AI innovation, the labor share declines by 0.5% to 1.6%, potentially reducing it by 0.09 to 0.31 percentage points from an average of 52%, solely due to AI. This new technology has a particularly negative impact on high- and medium-skill workers, primarily through wage compression, while for low-skill workers, employment expansion induced by AI mildly offsets the associated wage decline. The effect of AI is not driven by other factors influencing regional development in Europe or by the concentration of the AI market.

About this publication

Leading field journal. A leading journal in economics or a neighbouring field (on the Tinbergen Institute’s A list or near the top of the RePEc ranking), or a top-rated computer-science venue.

Placed by: Tinbergen Institute A list. How sources are ranked.

Published
2025 (17 months ago)
Citations
39 (OpenAlex)

Citations in context

median 10 this paper: 39 0 591

39 citations — 82nd percentile among the 33 indexed papers from 2025 in this collection. Citation counts favor older papers; this compares only same-year papers here, not the whole literature.

2020202120222023202420252026 published

□ added to this collection in 2026.

Klaus Prettner signed the wemustactnow.ai letter · author affiliation matches seed institution vienna university of economics — part of why this paper is in the collection.

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