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AI Adoption and Labor Market Polarization: A Game-Theoretic Model Based on Occupational Substitution Elasticity
- 1 Zhejiang Gongshang University
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Abstract
This paper explores the dynamics of AI adoption and its impact on labor market polarization through a game-theoretic model incorporating occupational substitution elasticity. By modeling the strategic interaction between firms and heterogeneous labor groups, we demonstrate how differences in substitution elasticity between high-skill, middle-skill, and low-skill occupations lead to divergent outcomes in wage distribution, employment, and firm profitability. The results reveal that when the elasticity of substitution for middle-skill jobs is high, firms have stronger incentives to automate these roles, exacerbating labor market polarization. The findings provide a theoretical foundation to understand how technological advances—particularly in artificial intelligence—reshape labor structures, and suggest implications for education policy, labor regulation, and corporate strategy.
Keywords
AI adoption; labor market polarization; occupational substitution elasticity; game theory; automation; employment structure; wage inequality; technological unemployment
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Cite this article
Li,C. (2025). AI Adoption and Labor Market Polarization: A Game-Theoretic Model Based on Occupational Substitution Elasticity. Journal of Economic and Managerial Dynamics,1(1),24-31.
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