Whither the Walking Dead? The Consequences of Artificial Intelligence for Zombie Firms

Ryan Banerjee, Sebastian Doerr and Boris Hofmann

The Economists' Voice, 2024, vol. 21, issue 2, 237-248

Abstract: Zombie firms have been a prominent yet controversial subject of academic and policy debates in recent years. In this article, we first revisit the economic consequences and driving factors of zombie companies and then, based on this assessment, discuss the implications of artificial intelligence (AI) for zombie firms. We document that the share of zombie firms in advanced economies has risen considerably over the past three decades, and that this increase has been a significant drag on productivity growth. We further find that persistently low interest rates are a significant causal factor underlying the rise of zombie companies. Turning to AI, we argue that an AI-induced productivity boom may counteract the drag from zombie firms and improve firm performance, mitigating corporate zombification. Moreover, by leading to higher interest rates that force zombie firms to exit markets, AI may boost productivity further in the longer run – a so far overlooked channel in the debate on the economic implications of AI.

Keywords: productivity; zombie firms; interest rates; artificial intelligence (search for similar items in EconPapers)
JEL-codes: D24 G33 O33 O40 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/ev-2024-0061

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