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The Impact of Artificial Intelligence and Automation on Labor Markets: The Role of Organizations in Advanced and Developing Economies

Ubeydullah ŞENER · Zenodo (CERN European Organization for Nuclear Research) · 2 Jun 2026

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A fixed-effects panel study of 13 developed and developing countries over 2005-2024 finding that AI and automation increased wage inequality, with industrial robotization raising inequality more in advanced economies. Institutional quality significantly moderated the effect, so inequality outcomes depend on institutions as well as technology.

Abstract

This study discusses the role of institutional factors in the effects of artificial intelligence and automation on labor marketinequalities. A panel data set covering the period 2005–2024 was used, comprising 7 developed countries (South Korea,Japan, Germany, the United States, France, Italy, and Spain) and 6 developing countries (China, Turkey, Poland, Hungary,Mexico and Brazil). The findings indicate that technological transformation and the spread of artificial intelligence andautomation have increased wage inequality in the labor market, though this effect varies across countries. The empiricalstrategy, tested using fixed-effects panel regression and interaction models, examines three main hypotheses: (H1) AI andautomation increase wage inequality; (H2) This effect is more pronounced in developed countries; (H3) Institutional qualitysignificantly moderates this relationship.The interaction model (β₃ = 0.89, p < 0.001) showed that institutional quality significantly mitigated the effects oftechnological transformation on inequality. Industrial robotization has significantly increased inequality in advancedeconomies. In contrast, this effect was less pronounced in developing economies. The results suggest that inequality isshaped not only by technological progress but also by institutional factors.

About this publication

Preprint. A preprint — posted publicly before or without journal peer review; findings may still be revised.

Published
2026 (5 months ago)
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