University of Kwazulu-Natal

The Impact Of Ai On Economic Growth A Take For Emerging Economies

Bonisiwe Shabane
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the impact of ai on economic growth a take for emerging economies

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. 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.

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.

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... 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. Keywords: generative artificial intelligence, emerging market economies, economic growth, productivity differentials, technological readiness, sectoral exposure to AI Brooke Tanner, Josie Stewart, Nicol Turner Lee Around the world, policymakers are recognising artificial intelligence’s immense potential to reshape economies, transform industries, and strengthen global competitiveness.

While generative AI chatbots and image generators have captured the public’s attention, these tools are just a fraction of the sweeping economic transformation AI is poised to catalyse through increasing labour productivity, improving public... However, realising these benefits demands not only continued technological advancement but also widespread adoption and adaptation across all sectors of the economy. History suggests that countries that gain the most from innovation are not necessarily those that invent technologies first, but rather those that deploy them most effectively. Today, nearly 70 countries have adopted national AI strategies and policies. While many are still in the early stages of translating these strategies into action, a select group are emerging as AI Pioneers, moving beyond policy blueprints to make tangible investments in AI development and... Google’s newly released report, AI Pioneers: How Countries are Seizing the AI Opportunity, delves into how leading countries are navigating this pivotal moment.

The report explores how countries are accelerating AI adoption by building across the three pillars of an AI Opportunity Agenda: (1) building robust AI infrastructure; (2) developing a skilled workforce; and (3) fostering a... Progress across all three is essential for attracting the investments needed to build the technical foundation for broad AI adoption. Share the post "Balancing Progress and Inequality: The Impact of AI on Emerging Economies" The rapid rise of artificial intelligence (AI) and automation technologies is reshaping global economies. While these advancements promise efficiency and innovation, they also bring challenges—particularly for developing countries and emerging economies. This blog post delves into the dual impacts of AI, critically analyzing whether current strategies are sufficient for fostering inclusive growth in these regions.

The Labor Conundrum: Efficiency vs. Equity AI’s labor-saving nature favors developed economies that can capitalize on technological advancements due to existing infrastructure and skilled labor pools (Korinek & Stiglitz, 2021). Emerging economies, by contrast, risk losing their competitive advantage in labor-intensive industries. For example, garment manufacturing—once a stronghold for countries like Bangladesh—faces potential disruption from AI-driven automation. This shift raises critical questions: Should developing nations attempt to emulate the automation pathways of developed countries, or should they prioritize human-centric strategies?

A possible alternative is hybrid solutions that balance technological integration with human employment, but such approaches demand nuanced policymaking and substantial investment. Images for download on the MIT News office website are made available to non-commercial entities, press and the general public under a Creative Commons Attribution Non-Commercial No Derivatives license. You may not alter the images provided, other than to crop them to size. A credit line must be used when reproducing images; if one is not provided below, credit the images to "MIT." For all the talk about artificial intelligence upending the world, its economic effects remain uncertain. There is massive investment in AI but little clarity about what it will produce.

Examining AI has become a significant part of Nobel-winning economist Daron Acemoglu’s work. An Institute Professor at MIT, Acemoglu has long studied the impact of technology in society, from modeling the large-scale adoption of innovations to conducting empirical studies about the impact of robots on jobs. In October, Acemoglu also shared the 2024 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with two collaborators, Simon Johnson PhD ’89 of the MIT Sloan School of Management and James... Their work shows that democracies with robust rights sustain better growth over time than other forms of government do. Since a lot of growth comes from technological innovation, the way societies use AI is of keen interest to Acemoglu, who has published a variety of papers about the economics of the technology in...

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