Generative AI : Catalyst for Growth or Harbinger of Premature De-Professionalization ?

This paper presents a multi-sector growth model to elucidate the general equilibrium effects of generative artificial intelligence on economic growth, structural transformation, and international production specialization. Using parameters from the literature, the paper employs simulations to quantify the impacts of artificial intelligence across various scenarios. The paper introduces a crucial distinction between high-skill, highly digitalized, tradable services and low-skill, less digitalized, less-tradable services. The model’s key propositions align with empirical evidence, and the simulations yield novel and sobering predictions. Unless artificial intelligence achieves widespread cross-sector adoption and catalyzes paradigm-shifting innovations that fundamentally reshape consumer preferences, its growth benefits may be limited. Conversely, its disruptive impact on labor markets could be profound. This paper highlights the risk of “premature de-professionalization”, where artificial intelligence likely shrinks the space for countries to generate well-paid jobs in high-skill services. The analysis portends that developing countries failing to adopt artificial intelligence swiftly risk entrapment as commodity exporters, potentially facing massive youth underemployment, diminishing social mobility, and stagnating or even declining living standards. The paper also discusses artificial intelligence’s broader implications on inequality, exploring multiple channels through which it may exacerbate or mitigate economic disparities.