Artificial intelligence and growth in advanced and emerging economies: short-run impact
Summary
Focus
We study how generative artificial intelligence (AI) affects short-run growth across countries. Our analysis covers 56 economies and 16 industries. We combine two elements. First, industries differ in how much they rely on cognitive and knowledge-based tasks, and so differ in their exposure to AI. Second, countries differ in their readiness to adopt new technology, based on their digital infrastructure, human capital, innovation capacity and regulatory frameworks. We measure industry exposure using data from the United States and country readiness using the International Monetary Fund's AI preparedness index. We then link these measures to the change in real value added in each country-industry pair between 2022 and 2023.
Contribution
Existing research focuses mainly on the United States and large advanced economies. Much less is known about how emerging market and developing economies stand to benefit from AI in the near term. Yet the structure of their economies differs, and many have weaker digital infrastructures. This raises the possibility that AI may widen global income gaps. Our paper provides one of the first global assessments of how sectoral exposure and country readiness interact to shape short-run growth.
Findings
We find that industries that rely more on knowledge and skilled labour gain the most from AI. Countries with stronger digital infrastructure, clearer regulatory frameworks and a more skilled workforce also see larger growth effects. Advanced economies tend to score higher on these dimensions, so they are likely to benefit more from generative AI in the short term. Many emerging market economies gain less, partly because their production structures are more concentrated in low-exposure sectors and partly because they are less prepared to adopt new technologies. These patterns hold even when we account for the use of robots. Overall, the spread of AI could widen global income gaps in the near future.
Abstract
This paper investigates whether the positive effects of generative artificial intelligence (gen AI) on growth rate of value added differ across countries in the short run. Using an empirical strategy inspired by Rajan and Zingales (1998) and a dataset covering 56 economies and 16 industries, we find that the differential growth effects arise from variations in sectoral exposure to cognitive and knowledge-intensive activities, differences in production structures, and countries' AI preparedness. Our results suggest that, on average, gen AI is likely to benefit advanced economies more than emerging market economies, thereby widening global income disparities in the near term.
JEL Classification: E24, O47, O57
Keywords: generative artificial intelligence, emerging market economies, economic growth, productivity differentials, technological readiness, sectoral exposure to AI
