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Differential investment in an AI-based technology and economic growth: a tale of two regions

Year: 2025

Type: article

Abstract: In this paper, we analyze a dynamic model in which two stylized regions, A and B, use an artificial intelligence (AI)-based technology α(t) to produce a knowledge good Q(t). Even though the initial value of the AI-based technology α(0) is identical in both regions, region A saves and hence invests more than region B to make the existing AI-based technology more powerful. We show that this differential investment means that the ratio of the output of the knowledge good in region A to region B or QA QB⁄ is continually rising. In other words, without targeted policy, region A will become a “leading region” that experiences economic growth and innovation ahead of region B which will become a “lagging region” that innovates less and hence tends to grow more slowly.

Source: Eastern Journal of European Studies

DOI: 10.47743/ejes-2025-0101

Authors: Amitrajeet A. Batabyal, Hamid Beladi

Institutions: Rochester Institute of Technology, The University of Texas at San Antonio

Language: English

Topic: Economic Growth and Productivity

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Industry, innovation and infrastructure

Open Access status: diamond

OpenAlex ID: W4411923873

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