AI adoption boosts Italian firm productivity and shapes inflation expectations
A Banca d'Italia study finds that artificial intelligence adoption among Italian firms increases labor productivity and profitability. AI-adopting firms also anticipate smaller price increases and lower medium- to long-term inflation, suggesting efficiency gains.
Productivity gains and shifting workforce
As of 2024, artificial intelligence (AI) adoption remains limited among Italian firms with at least 50 employees, with about 11 percent reporting current use and 28 percent planning adoption within two years.
Adoption is concentrated among larger, more knowledge-intensive firms and those with higher labor costs.
Using a difference-in-differences framework, the study shows that AI adoption increases labor productivity and profitability.
It also leads to a reallocation of employment toward higher-skilled occupations, with a statistically significant expansion of white-collar employment and a contraction of blue-collar employment.
No detectable effects on overall employment are found.
Furthermore, AI-adopting firms anticipate smaller increases in their own prices and lower medium- to long-term inflation than non-adopters, consistent with expected efficiency gains shaping pricing behavior and macroeconomic expectations.
Data-driven insights from Italy
The research addresses a gap in understanding how firms integrate AI, what drives adoption, and its impact on performance and expectations.
Italy provides an informative setting due to its persistently weak productivity growth and economic structure dominated by small and medium-sized firms.
The paper combines newly collected survey data from the Bank of Italy's Survey on Inflation and Growth Expectations (SIGE) with administrative balance sheet data (CADS) and employer-employee records from the Italian National Social Security Institute (INPS).
This comprehensive dataset allows for detailed analysis of AI diffusion, determinants of adoption, and its effects on firm performance and labor composition.
AI: Slow start, clear direction
This study offers critical micro-level evidence on AI's economic impact, particularly its novel link to firms' inflation expectations.
It underscores the slow, yet skill-biased, adoption of AI in Italy, revealing a clear path for productivity gains.
Policymakers should leverage these insights to foster broader AI integration and address potential workforce transitions.