Artificial Intelligence and Economic Growth: A Theoretical Framework

Authors

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

DOI:

https://doi.org/10.47743/saeb-2021-0027

Keywords:

Artificial intelligence, Automation, Economic growth, Industry 4.0.

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.

Author Biographies

Lei Wang, Wuhan University

Professor and Director, Institute for the development of Central China, School of Economics and Manaement

Provash Sarker, Wuhan University

Institute for the Development of Central China, School of Economics and Management

Kausar Alam, BRAC University, Dhaka

BRAC Business School, Assistant Professor

Shahneoaj Sumon, Bangladesh Bank

Joint Director, Bangladesh Bank

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Published

2021-11-26

How to Cite

Wang, L. ., Sarker, P., Alam, K., & Sumon, S. . (2021). Artificial Intelligence and Economic Growth: A Theoretical Framework. Scientific Annals of Economics and Business, 68(4), 421–443. https://doi.org/10.47743/saeb-2021-0027

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