"Generate" the Future of Work through AI: Empirical Evidence from Online Labor Markets

Understand

Large Language Model (LLM)-based generative AI systems are general-purpose tools capable of augmenting or even automating a wide range of job functions, positioning them to reshape labor market dynamics.

• However, predicting their precise impact a priori is challenging, given AI's simultaneous effects on both demand and supply, as well as the strategic responses of market participants.
• Leveraging an extensive dataset from a leading online labor platform, we document a pronounced displacement effect and an overall contraction in submarkets where required skills closely align with core LLM functionalities.
• Although demand and supply both decline, the reduction in supply is comparatively smaller, thereby intensifying competition among freelancers.