AI Risk and Public Debt in the APEC Economies

Minsoo Han
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Minsoo Han: Hankuk University of Foreign Studies

No 25-3, APEC Study Series from Korea Institute for International Economic Policy

Abstract: In this paper, we estimate additional government expenditure used to reduce AI’s existential risk and assess public debt sustainability. Our most important policy-relevant finding is that even under the conservative assumption that government expenditure equals the maximum amount society is willing to sacrifice to mitigate AI risk, and that all such expenditure is financed by issuing sovereign bonds rather than raising taxes, government debt does not necessarily become explosive. Instead, in our benchmark scenario—where the growth-enhancing effect of AI is calibrated to the average of prior studies—the debt ratio remains sustainable for most APEC economies. We also find that, except for Russia, an additional AI-driven growth effect of 3.4–6.1% would suffice for debt financing to remain sustainable for many APEC economies. In particular, for the United States, the required effect is 3.8% or 4.6%, depending on parameter assumptions. For faster growing economies such as China and Korea, the required additional effect is even smaller than for the United States.

Keywords: Artifical Intelligence; AI’s Existential Risk; Public Debt; AI; APEC (search for similar items in EconPapers)
JEL-codes: D11 D81 H43 I31 O31 (search for similar items in EconPapers)
Pages: 44
Date: 2025-12-05
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kiepas:022542

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