Artificial Intelligence and Economic Growth: A Theoretical Framework

Lei Wang, Provash Sarker, Kausar Alam and Shahneoaj Sumon
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Lei Wang: Wuhan University
Provash Sarker: Wuhan University
Kausar Alam: BRAC University, Dhaka
Shahneoaj Sumon: Bangladesh Bank

Scientific Annals of Economics and Business (continues Analele Stiintifice), 2021, vol. 68, issue 4, 421 - 443

Abstract: The growing adoption of Artificial Intelligence (AI) has sparked ubiquitous concerns worldwide. Artificial intelligence can affect economic growth and employment. The influence is assumed to be substantial because the adoption of AI technology may lead to increased productivity, lower wages, prices, and labor substitution. Artificial intelligence can affect global economic growth with its widespread adoption and diffusion. We mathematically examined the effects of AI on economic growth, reiterating how AI is unique as a production factor. The models show that AI capital lowers capital prices, increases wages, and augments productivity. Besides, AI capital positively affects the labor share and vice versa, provided that AI and labor are complementary. We improved a task-based model to show AI raises both labor share and wages by generating new tasks. We also present the potential policy implications of AI adoption. We conclude AI can contribute to economic growth. Labor-abundant countries should adopt labor-augmenting technology, while countries with an aging population can adopt capital-augmenting technology. However, caution should be exercised in ensuring that the models are leveraged optimally.

Keywords: Artificial intelligence; Automation; Economic growth; Industry 4.0. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:aic:saebjn:v:68:y:2021:i:4:p:421-443:n:17

DOI: 10.47743/saeb-2021-0027

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