Conditional Gains: When AI Investment Enhances Firm Efficiency

Kazakis, Pantelis (2025): Conditional Gains: When AI Investment Enhances Firm Efficiency.

Abstract

The rapid adoption of artificial intelligence (AI) in the corporate world has raised important questions about its impact on firm performance. This paper examines whether investments in AI—measured by the share of AI-skilled workers—are associated with improvements in firm efficiency. The analysis reveals that AI investment alone does not lead to higher efficiency. That is, firms employing more AI-skilled labor do not, on average, perform more efficiently than others. However, the results show that this relationship depends on firm context. Firms operating in more competitive markets appear to benefit more from AI investment. Additionally, firms that engage more heavily in tax avoidance also realize greater efficiency gains from AI, possibly due to their more aggressive or strategic resource allocation practices.

• Item Type: MPRA Paper
• Language: English
• Keywords: artificial intelligence (AI), firm efficiency, market power, tax avoidance
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms

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