AI and Labor Market Matching Efficiency- Investigating the relationship between AI adoption and matching efficiency in the European labor market

Abstract

The recent developments in artificial intelligence are bound to change established work processes and in turn labor markets. One dimension – which AI impacts – is the labor market matching efficiency. The net effect of increased AI usage on the matching quality is ambiguous, as it affects several dimensions of the matching process. Using data from Eurostat, OECD and other national statistical bureaus, the relationship between AI and matching efficiency in Europe is estimated. Applying the Beveridge curve to measure matching efficiency, no relationship between increased AI usage and matching efficiency is found. If anything, using a broader measurement than unemployment – labor market slack – AI is correlated with improved matching efficiency. Findings also show industry heterogeneity, where job vacancies are impacted differently by AI depending on the industry. Regardless, the aggregated job vacancy is not correlated with increased AI usage. As such, findings suggest that net gains made from AI adoption are unlikely to come at the expense of a worse matching quality in Europe.