AI Adoption in US Manufacturing: Short-Term Pains, Long-Term Gains
Summary
A study on US manufacturing reveals short-term productivity losses but long-term gains from AI adoption, with older businesses facing initial challenges mitigated by growth strategies and within-firm spillovers, highlighting the transformative potential of AI amid transitional pains.
Key Points
- The study examines the prevalence and productivity dynamics of artificial intelligence (AI) in American manufacturing using detailed data from 2017 and 2021.
- It finds causal evidence of J-curve-shaped returns, where short-term performance losses precede longer-term gains, with AI adoption leading to increased work-in-progress inventory, industrial robot investment, and labor shedding initially.
- The losses are concentrated among older businesses but mitigated by growth strategies and within-firm spillovers, while abandonment of structured production practices accounts for about one-third of losses in older establishments.