ARTIFICIAL INTELLIGENCE IMPACT ON PRODUCTIVITY AND ECONOMIC GROWTH

Abstract

The increasing diffusion of AI has generated considerable interest among economists and management scholars, because technological change is a fundamental source of long-term productivity and economic growth. In conventional growth theory, technological progress enables economies to produce more output from a given quantity of labour and capital. AI may influence this process by increasing the efficiency of existing production activities, augmenting workers' capabilities, accelerating research and development, and improving the allocation of organisational resources.

Unlike many earlier digital technologies, AI can perform tasks involving prediction, classification, information processing, content generation and decision support. Consequently, its potential economic effects extend beyond the automation of routine activities to include innovation, organisational transformation, human–machine collaboration and the creation of new products and business models.

AI should not be considered an automatic source of economic growth. The productivity consequences of a new technology depend on complementary investments, organisational capabilities, institutional conditions, and the ability of workers and managers to incorporate the technology into production processes.

AI can increase aggregate productivity and economic output, but the benefits may not be distributed equally. There are several risks, such as displacement of workers performing automatable tasks, wage polarisation, concentration of technological capabilities, advantages for large firms and divergence between technologically advanced and less-prepared economies.

Moreover, countries differ substantially in their digital infrastructure, human capital, research capacity, access to finance, institutional quality, and ability to adopt advanced technologies. These differences can determine whether AI becomes a source of broad-based productivity growth or primarily benefits already advanced firms and economies.

The most successful economies are likely to be those that treat AI not simply as a tool for automation, but as an opportunity to complement human capabilities. Investments in skills, infrastructure, innovation, competition and responsible governance can help ensure that the productivity gains created by AI translate into higher living standards and more inclusive long-term economic growth.