The Impact of Generative Artificial Intelligence

The rise of generative artificial intelligence (AI) has sparked concerns about its potential influence on unemployment and market depression. This study addresses this concern by examining the impact of generative AI on product markets. To overcome the challenge of causal inference, given the inherent limitations of conducting controlled experiments, this paper identifies an unanticipated and sudden leak of a highly proficient image-generative AI as a novel instance of a "natural experiment". This AI leak spread rapidly, significantly reducing the cost of generating anime-style images compared to other styles, creating an opportunity for comparative assessment. We collect real-world data from an artwork outsourcing platform. Surprisingly, our results show that while generative AI lowers average prices, it substantially boosts order volume and overall revenue. This counterintuitive finding suggests that generative AI confers benefits upon artists rather than detriments. The study further offers theoretical economic explanations to elucidate this unexpected phenomenon. By furnishing empirical evidence, this paper dispels the notion that generative AI might engender depression, instead underscoring its potential to foster market prosperity. These findings carry significant implications for practitioners, policymakers, and the broader AI community.