Moving ahead, standing still: state-led artificial intelligence development and the within-firm pay gap

Governments increasingly promote artificial intelligence through programmes that channel subsidies, projects, and talent into selected cities, yet little is known about how such support is shared inside firms. This study examines China’s national artificial intelligence innovation and development zones, which were approved city by city, and compares private listed firms in these cities with firms elsewhere from 2014 to 2024. After a city joins the programme, the pay gap between executives and ordinary employees widens by about 4.1%. The widening comes mainly from higher pay per executive, while the pay of a typical employee barely moves. Firms hire more technical staff, yet average employee pay stays nearly flat, which suggests weak wage growth in routine jobs. Government subsidies also rise, and executive pay becomes more closely tied to them. The widening is larger in high-tech firms, in firms whose managers have political connections, and in cities with stronger digital infrastructure. These findings suggest that support for artificial intelligence may benefit from measures that help routine workers upgrade their skills and make the use of public funds in pay more transparent.