Research

Abstract This paper studies how labor market informality shapes the transmission of monetary policy in emerging economies. Using a structural VAR for Colombia, I document that after a contractionary monetary policy shock informal employment declines together with aggregate output: the informality share follows the same path as the aggregate economy. A two-sector New Keynesian model with endogenous labor reallocation explains this evidence: the informal sector provides the economy’s flexible margin of adjustment, with wages adjusting mainly in the formal sector and employment mainly in the informal one, so that marginal costs and inflation fall faster while the contraction in formal employment and output is muted. Informality thus strengthens the transmission of monetary policy to inflation while weakening its leverage over real activity.

JEL E24; E26; E31; E32; E52; O17

Keywords: Informal employment; Monetary policy transmission; Dual labor markets; New Keynesian model; SVAR; Emerging economies.

Abstract: This paper revisits the relationship between Artificial Intelligence (AI) and green productivity by explicitly modeling AI adoption as an endogenous and directed process. Existing literature typically treats AI as a homogeneous and exogenous increase in automation, documenting a “green productivity paradox” whereby digital investment does not necessarily translate into immediate productivity gains, particularly in energy-intensive economies. We propose a framework in which firms optimally choose the direction of AI innovation between green and non-green applications. Using firm-level patent data (PATSTAT/OECD REGPAT), we construct a measure of green-directed AI as the share of AI patents associated with climate mitigation technologies (Y02). This is combined with balance-sheet data (ORBIS/Amadeus) and country-level measures of energy prices and carbon regulation. We first estimate a policy function for the direction of AI adoption, and then assess its impact on green total factor productivity accounting for endogeneity. The results show that the effects of AI on environmental performance critically depend on its direction of use. The so-called green productivity paradox largely reflects the assumption of exogenous and undirected AI adoption. Once AI is modeled as endogenous and directed, its impact is shaped by firms’ characteristics and policy incentives. 

JEL: O33, O30, Q55, Q58, L25

Keywords:Artificial Intelligence, Green Productivity, Directed Technological Change, Firm-Level Innovation, Environmental Regulation, Productivity Paradox