AI use in economy

Artificial Intelligence (AI) has become a buzzword recently; however, the discussions have only taken an alarmist turn, without acknowledging that, inevitably, AI will spread into economic activities that build on the present use of computers and the internet. We present below excerpts from one quantitative study, “Firms’ Use of Artificial Intelligence: Cross-Country Evidence on Business Characteristics, Asset Complementariness, and Productivity”, published by VoxEU as a corrective for our policymakers in the emerging age of AI.
“Artificial intelligence (AI) is rapidly transforming economies and societies. AI is already reshaping the demand for skills, and AI-driven products and services have become an integral part of people’s daily routines, although they may not be fully aware of it. AI is often considered a general-purpose technology (GPT) with the potential to bring significant improvements to adopters. It could play a critical role in addressing societal challenges such as health and climate change by fostering breakthrough innovations. Although AI presents significant opportunities for boosting productivity and well-being, it also poses risks – for example, for financial markets, inequalities, and democratic values.
Based on representative data from 11 countries, our recent analysis focuses on the characteristics of firms using AI, the role of complementary assets, and the links between AI use and productivity. The analysis focuses on 11 countries: Belgium, Denmark, France, Germany, Ireland, Israel, Italy, Japan, Korea, Portugal, and Switzerland. The analysis of the cross-country patterns of AI use by firms highlights five key findings.
AI use is more widespread among large firms. This may be relevantly related to their higher endowments or capabilities to use intangibles and other complementary assets required to leverage the potential of AI fully. Younger firms tend to have higher shares of AI use. Start-ups are more likely to introduce more radical innovations, especially with the advent of new technological paradigms. ICT and Professional Services have the highest sectoral shares of AI users. This indicates that AI use is not yet equally distributed across all sectors of the economy. Considering that AI is at a relatively early stage of diffusion, this suggests that its full potential as a GPT is yet to be fully realised.
The use of AI is significantly linked to the presence of complementary assets, such as ICT skills and training, firm-level digital capabilities (proxied by the use of other digital technologies), and digital infrastructure. More general skills and innovative activities appear also positively associated with AI use.
On average, AI users tend to be more productive than non-users, with productivity premia being more pronounced among larger firms. But this does not seem to reflect the use of AI alone. In fact, the abovementioned complementary assets, especially those related to digital transformation, play a critical role in the productivity advantages of AI users.
The evidence outlined above suggests that some firms – those that are larger, that have higher digital capabilities, and that are likely to be more productive already – are those currently exploiting AI more intensively. Initial evidence for one country (France) also seems to highlight that some more direct effects of AI on productivity may start emerging for firms that develop their own AI algorithms, likely endowed with higher digital capabilities and complementary assets.
Polarised adoption of AI, mainly by larger and more productive firms, combined with a role of AI in strengthening their advantages, may imply that existing gaps between leaders and other firms could widen in the future, with relevant implications for social outcomes. In this context, policymakers can play a crucial role in fostering an inclusive digital transformation through a broad policy mix that affects incentives and capabilities, and that captures synergies across policy areas.
This would include not only measures raising awareness about new technologies and developing firms’ absorptive capacities, but also providing relevant credit tools, fostering competition, improving knowledge production and sharing, and strengthening the foundation of digital infrastructure and skills.
Focusing on these complementary policy areas may enable AI use and its returns to be more widely spread across firms and sectors, fostering an inclusive digital transformation in the age of AI.”