Early AI Adoption and Firm Productivity Growth in a Middle-Income Economy: Evidence from Colombia

This paper examines the relationship between artificial intelligence (AI) adoption and firm-level productivity growth in a middle-income economy. Combining data on AI use from the 2019 Colombian Enterprise ICT Survey with longitudinal manufacturing data, I estimate productivity growth differentials between adopters and non-adopters while accounting for pre-adoption characteristics and productivity trajectories using entropy balancing. AI adoption is associated with a 16 percent cumulative increase in labor productivity over 2016–2019, equivalent to roughly 5 percent annualized growth. These differentials appear to be driven by higher sales and value added rather than reductions in costs or employment, are similar among in-house and outsourced AI developments, and increase for firms with higher pre-existing technical capabilities. Finally, the analysis points to changes in organizational structure as a potential adjustment margin. AI adoption is associated with a small but significant decline in the share of administrative workers, suggesting a reallocation of tasks away from administrative functions.