Monday, May 11 / 12:00pm to 1:00pm Pacific Time
Kristina McElheran | The Rise of Industrial AI in America: Microfoundations of the Productivity J-curve(s)
- Hybrid
- Seminar
The DEL Seminar Series is proud to host a diverse roster of bright minds from around the world to discuss various subjects surrounding economics and technology.
On Monday, May 11 Kristina McElheran, Associate Professor at the University of Toronto, will stop by the Lab for our Seminar Series.
This is a hybrid event, streamed live on Zoom. Members of the Stanford community may register to attend in-person.
Abstract
We examine the prevalence and productivity dynamics of artificial intelligence (AI) in American manufacturing. Working with the Census Bureau to collect detailed large-scale data for 2017 and 2021, we focus on AI-related technologies with industrial applications.
We find causal evidence of J-curve-shaped returns, where short-term performance losses precede longer-term gains. Consistent with costly adjustment taking place within core production processes, industrial AI use increases work-in-progress inventory, investment in industrial robots, and labor shedding, while harming productivity and profitability in the short run. These losses are unevenly distributed, concentrating among older businesses while being mitigated by growth-oriented business strategies and within-firm spillovers.
Dynamics, however, matter: earlier (pre-2017) adopters exhibit stronger growth over time, conditional on survival. Notably, among older establishments, abandonment of structured production-management practices accounts for roughly one-third of these losses, revealing a specific channel through which intangible factors shape AI’s impact.
Taken together, these results provide novel evidence on the microfoundations of technology J-curves, identifying mechanisms and illuminating how and why they differ across firm types. These findings extend our understanding of modern General Purpose Technologies, explaining why their economic impact—exemplified here by AI—may initially disappoint, particularly in contexts dominated by older, established firms.
Kristina McElheran
Digital Fellow
Kristina McElheran is an Associate Professor at the University of Toronto, where she researches how digital technologies shape firms, their performance, and the future of work. After six years on the Harvard Business School faculty, she joined the University of Toronto in 2014. Her research spans the rise of the commercial internet through the rise of cloud computing and AI-related technologies, with a focus on productivity, entrepreneurship, and worker-level impacts. Her research has appeared in Management Science, the Journal of Economics and Management Strategy, the Journal of Econometrics, the American Economic Review Papers & Proceedings, Harvard Business Review, Sloan Management Review, Communications of the ACM, The Economist, and other leading outlets in the U.S. and Canada. She is a Faculty Fellow at the Schwartz Reisman Institute for Technology and Society, which serves as a research and solutions hub at the University of Toronto dedicated to deepening understanding of technologies, societies, and what it means to be human. She is also a Digital Fellow at the MIT Initiative on the Digital Economy and a Fellow at the Technology and Policy Research Initiative at Boston University.
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