Lecture Four :Economic

impacts of artificial
intelligence (AI)
Economic impacts of artificial
intelligence (AI)
How is artificial intelligence viewed as an engine of productivity and economic growth?

What potential disruptive effects could AI have on the economy and society?

What potential disruptive effects could AI have on the society as a whole?

Is there a consensus on the risks associated with the widespread adoption of AI technology?
Artificial intelligence (AI) as an
engine of productivity and economic
growth
Artificial intelligence (AI) is widely viewed as an engine of productivity and economic
growth due to several key factors:

❖ Increased Labor Productivity: AI technologies enable more efficient workforce-related

time management, leading to a potential increase in labor productivity by up to 40%.

AI can automate repetitive and routine tasks that would otherwise consume a significant
amount of time for human workers.
By delegating these tasks to AI systems, employees can focus on more strategic and
value-added activities, thereby increasing overall productivity
Artificial intelligence (AI) as an
engine of productivity and economic
growth
❖ Creation of a Virtual Workforce: AI can create a new virtual workforce through
"intelligent automation," capable of problem-solving and self-learning, which can further
enhance productivity.

Remote Work allows employees to work from anywhere, breaking geographical barriers and
enabling flexibility in work arrangements.

This setup is particularly relevant in the context of advancements in communication

technology and collaboration tools
Artificial intelligence (AI) as an
engine of productivity and economic
growth
❖ Potential Economic Impact: Studies suggest that the accelerating development and
adoption of AI could lead to a significant increase in global GDP, with estimates ranging
up to 14% by 2030.

AI is expected to drive economic growth by enhancing productivity, streamlining processes,

enabling innovation, and creating new opportunities for businesses and industries.

By automating tasks, optimizing decision-making, and unlocking insights from data, AI can
catalyze efficiency improvements and revenue generation.
Potential disruptive effects could AI
have on the economy
❖ Labor Market Shock: The substitution of labor by automation and the potential loss of
jobs due to AI-driven technological advancements could lead to a shock in labor markets
and associated costs needed to manage labor-market transitions.

❖ Unemployment and Consumption: Negative externalities such as loss of domestic

consumption due to unemployment could result from the shock in labor markets caused by
AI-driven automation.

❖ Impact on Innovation: AI may partly discourage future innovation by accelerating

imitation, which could limit the return on innovation and constrain the overall impact of
new technologies on the economy.
Potential disruptive effects could AI
have on the society
❖ Displacement of Workers: The automation and increased innovation in products and
services driven by AI could lead to displacement of workers in certain sectors, potentially
impacting income distribution and economic inequality.

❖ Wage Inequality: The rising demand for high-skilled workers capable of using AI
could lead to an increase in their wages, while many others may face a wage squeeze
or unemployment, potentially intensifying income inequality.
The risks associated with the
widespread adoption of AI
technology?
There is no clear consensus on the risks associated with the widespread adoption of AI
technology. Views on the risks and challenges posed by AI vary among experts and
stakeholders. Some key points to consider include:

Job Displacement vs. Job Creation: There is a debate on whether AI will lead to a net
loss of jobs through automation or if it will create new job opportunities in emerging
sectors driven by AI technologies.
Income Inequality: While some argue that AI could exacerbate income inequality by
favoring high-skilled workers over low-skilled workers, others suggest that the impact on
inequality may not be significant in the short to medium term
The risks associated with the
widespread adoption of AI
technology?
Labor Market Polarization: AI has the potential to polarize the job market, with
high-skilled workers benefiting from AI technologies while low-skilled workers face
challenges in adapting to the changing labor market dynamic.

Global Disparities: Disparities in AI adoption levels across countries could widen the gap
between developed and developing economies, potentially leading to economic imbalances
and challenges in global competition.
The Role of policymakers ?

The adoption of artificial intelligence (AI) technology presents various risks and
challenges that are viewed differently.

It is essential for policymakers to carefully consider these factors and implement strategies
to maximize the benefits of AI while mitigating potential negative impacts on society and
the economy.