Artificial Intelligence and the Demand for Hours Worked

Abstract: In this paper, we develop a theoretical model that explores how artificial intelligence (AI) influences a firm's labor demand decisions regarding hours worked per employee on the intensive margin. We conceptualize AI as a new input that affects both the production function and the effective-hours technology. Our findings indicate that worker hours increase with exposure to AI if and only if the elasticity of AI's indirect effect on effective hours surpasses that of its direct effect. These theoretical conclusions are evaluated using firm and household data from China.