Structural change

Explanation

A productivity boom in one sector does not mean that sector must absorb more workers or become a larger share of spending. If its output becomes cheap and demand is eventually satisfied, employment and expenditure can move toward other activities even while the productive sector supplies more than before.

Both price and income effects matter. Consumers substitute toward goods whose relative prices fall, but rising real income can also shift demand toward entirely different goods and services. Differences in sectoral productivity can reinforce the movement by making slower-productivity services relatively expensive.

AI may therefore change the economy through reallocation as much as through direct job replacement. Which sectors expand depends on demand, worker mobility, institutions, and whether human involvement remains part of what consumers value; the direction and ease of transition are empirical questions, not automatic consequences of automation.