"AI May Boost Consumer Benefits Through Increased Entrepreneurship and Competition, Says U.S. AEI"

AP Yonhap News

Although there are concerns about the negative effects of artificial intelligence (AI)—such as job losses and income polarization—there is a growing argument that generative AI may already be delivering tangible benefits to consumers by increasing entrepreneurship and fostering competition.

James Pethokoukis, Senior Fellow at the American Enterprise Institute (AEI), made this point in an article titled "AI’s Early Gift to Consumers" posted on the institute’s website on the 23rd (local time), citing a recent paper by Professor Jose Carreño of Oregon State University’s Department of Economics.

The following summarizes the main points.

According to Professor Carreño’s paper, “The Macroeconomics of Generative AI: Firm Entry and Price Dynamics,” AI is making it easier to launch new businesses and is especially effective at reducing prices in the fields where it is most useful. Although fewer than one in five U.S. companies currently use generative AI, these changes are already being observed. If these early signals continue, the benefits of AI could appear well before the widespread labor disruptions that many fear.

The paper links occupation-level AI exposure to federal data on business formation and producer prices. In industries where AI can play a larger role—such as professional services, finance, and information technology—start-up activity has clearly increased. As of 2025, sectors with high AI exposure showed a growth rate about 9 percentage points higher than would have been expected based on pre-pandemic trends.

The increase was not limited to freelancers or so-called “one-person entrepreneurs.” The study also separately analyzed start-ups that have incorporated as legal entities, have set payroll schedules, and are likely to become major employers in the future. Here too, rapid growth was observed. This suggests that generative AI is enabling people to handle various cumbersome administrative tasks that previously hindered the establishment of legitimate companies, and to do so at much lower cost.

The trend is also encouraging in terms of prices. Before the pandemic, price movements in industries with high and low AI exposure were similar. However, starting around 2021, this began to change. Part of this shift was due to supply chain shocks affecting industries differently. Yet, even after those disruptions subsided, the gap did not narrow. In fact, prices in high-AI-exposure industries continued to rise more slowly, with the gap widening further in 2025. Data from early 2026 suggest this trend may be intensifying.

This analysis also carries policy implications. If AI acts as a persistent disinflationary force, central banks may need to adjust their long-term inflation outlooks accordingly. Policymakers who focus solely on the risk of job displacement could miss the bigger picture: technology that intensifies market competition can transform the nature of work while also raising living standards.

It is important to note that these effects are already being observed even though the adoption rate remains low. This indicates that the current benefits may represent only a minimum. As AI becomes more widely adopted, the competition-enhancing effects—and the resulting consumer benefits—are likely to increase further.

This content was produced with the assistance of AI translation services.