Differential Investment in an AI-Based Technology and Economic Growth: A Tale of Two Regions

Amitrajeet Batabyal and Hamid Beladi

MPRA Paper from University Library of Munich, Germany

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 Q(t). 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 Q_A⁄Q_B 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)
JEL-codes: O33 R11 (search for similar items in EconPapers)
Date: 2025-01-09, Revised 2025-04-30
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