Research

We measure how artificial intelligence (AI) affects the economy through its impact on software engineering productivity. We use information from financial markets to develop a forwardlooking measure that is available in real time. We estimate the sensitivity of each firm’s stock return to an AI stock market index, and how this sensitivity depends on the share of firm payroll in software engineering. We use a model to map this cross-sectional relationship into software engineering productivity gains. From November 2022 to December 2025, AI increased the market’s expected present value of software engineering productivity by the equivalent of a permanent 32.6% productivity increase. The corresponding effect on the level of GDP is 3.6% in the baseline and 6.5% when higher software engineering productivity also raises R&D productivity. By mid-2026, amid rapid progress in coding agents, the effect of AI on productivity and GDP had more than doubled relative to the end of 2025.

A growing literature documents rising sales concentration at “superstar” firms. But aggregate market share need not measure how important a firm is to its customers. Using trillions of dollars of credit- and debit-card transactions covering the near universe of firms in a broad set of U.S. consumer-facing retail and service categories, we measure firms’ “effective” market shares, defined as their shares of category spending among the particular customers they serve. Effective shares rise only weakly with conventional measures of firm size, meaning that large differences in aggregate market shares correspond to much smaller differences in effective shares. This distinction is economically meaningful: effective shares better predict persistent customer relationships and switching responses to new entrants. This weak mapping reflects two opposing forces. As firms grow, they deepen relationships with existing customers, raising effective shares, but they also reach more marginal customers, whose lower effective shares offset this increase. Prominent sources of recent firm growth, including geographic expansion and e-commerce, tilt toward reach rather than depth. Thus, aggregate sales concentration has risen substantially over the last decade without a commensurate increase in average effective shares. Interpreted through the lens of a variable-markup model with persistent customer heterogeneity, this empirical pattern suggests that rising concentration has not led to a comparable rise in size-based product-market power.