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The role of AI in transforming local economies: exploring how AI technologies are impacting local businesses and labor markets

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  • Meng, Zhiyi

Abstract

AI is emerging as a key disruptor of local economies. The impact of AI technologies including machine learning, automation and precision farming in reshaping local business landscape, unlocking innovation, enhancing productivity and creating net new jobs, is yet to be fully appreciated. This paper provides an analysis of the role of AI in revitalising local economies: how AI technologies are enabling small and medium sized enterprises (SME) to improve productivity, how rural economies can overcome labour shortages and supply chain issues and how to realise AIs transformative potential in the near term. It goes on to discuss the impact of AI on labour markets, the creation of net new jobs in data and drone related occupations and need for reskilling and upskilling. It also discusses the role of local governments in encouraging AI adoption through public-private partnerships, tax incentives and infrastructure improvements. The paper concludes with a discussion about how AI shapes the future of work, the need to address the digital divide and the role of AI in fostering sustainable economic development at the local level. This paper analyses the impact of AI on productivity, consumer engagement, supply chain optimisation and workforce transformation.

Suggested Citation

  • Meng, Zhiyi, 2024. "The role of AI in transforming local economies: exploring how AI technologies are impacting local businesses and labor markets," LSE Research Online Documents on Economics 127002, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:127002
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    File URL: http://eprints.lse.ac.uk/127002/
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    References listed on IDEAS

    as
    1. Thomas W. Sanchez & Hannah Shumway & Trey Gordner & Theo Lim, 2023. "The prospects of artificial intelligence in urban planning," International Journal of Urban Sciences, Taylor & Francis Journals, vol. 27(2), pages 179-194, April.
    2. Luciana Lazzeretti & Niccolò Innocenti & Martina Nannelli & Stefania Oliva, 2023. "The emergence of artificial intelligence in the regional sciences: a literature review," European Planning Studies, Taylor & Francis Journals, vol. 31(7), pages 1304-1324, July.
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    More about this item

    Keywords

    artificial intelligence; local economies; business innovation; workforce transformation;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories

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