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Do firms displace labor with new information technologies such as “artificial intelligence”? It is challenging to distinguish the effects of technology adoption from unobserved productivity and demand shocks. We take a first look at the economic impacts of large custom software investment —“IT spikes”—using a novel methodology to obtain consistent estimates. Following these events, firm employment increases by about 7% and revenues by about 11%. Rather than displace labor, IT spikes increase revenues and markups, implying decreased labor share of output. Moreover, growth is greater for firms that use AI, IT-producing firms, newer firms, and those in the trade, service, and financial sectors.

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