Discussion paper

DP18780 Economic Growth under Transformative AI

Industrialized countries have long seen relatively stable growth in output per capita and a stable labor share. AI may be transformative, in the sense that it may break one or both of these stylized facts. This review outlines the ways this may happen by placing several strands of the literature on AI and growth within a common framework. We first evaluate models in which AI increases output production, for example via increases in capital's substitutability for labor or task automation, capturing the notion that AI will let capital “self-replicate”. This typically speeds up growth and lowers the labor share. We then consider models in which AI increases knowledge production, capturing the notion that AI will let capital “self-improve”, speeding growth further. Taken as a whole, the literature suggests that sufficiently advanced AI is likely to deliver both effects.


Trammell, P and A Korinek (2024), ‘DP18780 Economic Growth under Transformative AI‘, CEPR Discussion Paper No. 18780. CEPR Press, Paris & London. https://cepr.org/publications/dp18780