Artificial Intelligence and Its Impact on Unemployment: A Comparative Analysis of Old and New EU Member States

This study examines the impact of venture capital (VC) investments in artificial intelligence (AI) on unemployment rates across 27 EU member states, distinguishing between old and new EU countries. Utilizing annual data from 2012 to 2023, we explore whether AI investments significantly influence unemployment and how these effects vary between advanced economies and those still developing their digital infrastructure. Employing the two-step system Generalized Method of Moments (GMM), we effectively address endogeneity and the dynamic nature of unemployment, making this method well-suited for our panel dataset covering 27 countries over 12 years. Our findings reveal that AI investments correlate with higher unemployment in old EU countries while positively impacting job creation in new EU member states. Based on these results, we recommend targeted policies to enhance AI adoption, improve digital infrastructure, and promote workforce training, particularly in new member states, to optimize the benefits of AI investments and mitigate potential job displacement. JEL Codes: O1, O3