Essex Economists appointed fellows at Microsoft's AI Economy Institute

Frontier AI firms and the transformation of work will be examined by Professor Friederike Mengel and Dr Christoph Siemroth from the Department of Economics after they were appointed as AI Economy Institute Fellows.

The Institute is Microsoft’s flagship think tank dedicated to shaping an “inclusive, trustworthy AI economy”. Its network of scholars is exploring how artificial intelligence is transforming work, education, and productivity. The aim is to develop actionable research and policy guidance to help societies, governments, and organisations adapt intentionally to AI-driven change.

Professor Mengel and Dr Siemroth are part of the third cohort of Fellows, which will focus on frontier firms, and are the only UK-based academics within this new group.

Professor Mengel said: “Christoph and I have been doing research on the process of innovation within firms and the diffusion of ideas for a number of years. We are now studying how AI tools will shape this process. On the one hand there is evidence that the introduction of AI can lead to more product diversity, but on the other hand there are concerns that the tendency of LLMs to favour high probability mainstream results will lead to ideation bubbles and fewer breakthrough ideas.

“Our research will shed light on these trade-offs and provide guidance on how to avoid potential pitfalls of introducing AI tools.”

Bringing together experts from around the world

The AI Economy Institute was launched because AI’s economic impact is not predetermined. Though AI is being rapidly adopted, the evidence base for understanding its impact on work, jobs, education, productivity, and opportunity is still too thin. By increasing the scholarship around the AI economy and producing it in a timely and accessible way, Microsoft aims to help ensure that as AI transforms our world, people are being equipped with the knowledge and tools they need to make decisions and succeed with AI.

The third cohort represents a diverse group of institutions worldwide and brings together 23 subject matter experts and researchers to explore how AI is reshaping the workforce, organizations, and the broader economy.

Cohort members will analyse frontier firms to examine both upstream, firm-level transformations and downstream, economy-wide impacts. Researchers will also explore how AI changes job design, skill demands, productivity, and regional economic development.

AIEI’s first two cohorts explored how AI is reshaping the talent pipeline, from higher education and skills to K-12, community colleges, and early-career pathways, to understand and inform the early changes to the labour market. The learning from that point of inquiry shifted the focus; this year’s cohort moves further into the economy itself, focusing on frontier firms and how leading organizations are adopting AI, redesigning work, and creating the conditions for productivity, diffusion, and human agency at scale.

Understanding the real impact of AI

Juan Lavista Ferres, Chief Data Scientist at Microsoft, said: “Since its launch, the AI Economy Institute has fielded more than 800 responses to our calls for research proposals. The gap between what AI systems can do and what organizations can actually deploy will shape the pace of adoption. Gains in productivity may come alongside organisational shifts as firms adapt their workflows, teams, and decision-making processes.

“At the same time, the expansion of automation raises a parallel question of whether systems are enhancing human learning or displacing it. Underlying all of this is a broader uncertainty about the extent to which AI will diffuse widely across economies or concentrate in a narrow set of firms and regions.

“Cohort 3 moves beyond identifying these tensions and toward generating the empirical evidence needed to navigate them, providing policymakers, firms, and institutions with a clearer basis for decision-making in a rapidly evolving AI economy.”