Differential investment in an AI-based technology and economic growth: a tale of two regions

Amitrajeet Batabyal and Hamid Beladi

Eastern Journal of European Studies, 2025, vol. 16(1), 5-12

Abstract: In this paper, we analyze a dynamic model in which two stylized regions, A and B, use an artificial intelligence (AI)-based technology α(t) to produce a knowledge good Qt. Even though the initial value of the AI-based technology α(0) is identical in both regions, region A saves and hence invests more than region B to make the existing AI-based technology more powerful. We show that this differential investment means that the ratio of the output of the knowledge good in region A to region B or QA/QB is continually rising. In other words, without targeted policy, region A will become a "leading region" that experiences economic growth and innovation ahead of region B which will become a "lagging region" that innovates less and hence tends to grow more slowly.

Keywords: artificial intelligence; dynamics; economic growth; region; technology (search for similar items in EconPapers)
Date: 2025
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Working Paper: Differential Investment in an AI-Based Technology and Economic Growth: A Tale of Two Regions (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:jes:journl:y:2025:v:16(1):p:5-12

DOI: 10.47743/ejes-2025-0101

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