Questrom's Gerry Tsoukalas models an "AI layoff trap" that hurts workers and firms

A paper co-authored by Questrom professor Gerry Tsoukalas argued that competition pushes firms to replace workers with AI faster than benefits anyone. Written with Brett Hemenway Falk of the University of Pennsylvania, The AI Layoff Trap models how each firm keeps its automation savings while lost wages shrink demand across the economy. In the model, both workers and owners end up worse off, and the effect is strongest in the most competitive markets. Of six policy responses tested, only a per-task tax on automation corrected the incentive. Students studying AI's labor-market effects can read the full paper.