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The Economic Impact of Generative AI
The Economic Impact of Generative AI

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GenAI is a general-purpose technology, quite like steam engine, IC engine, electrification etc. It is the nature of rapid improvement, pervasiveness and complimentary innovation that builds confidence in this technology. Although the historic technologies took decades to make substantial changes in the industry and historic shifts in skilled jobs and income, GenAI will have quicker impacts. Following are the 5 implications of Generative AI in terms of economic growth.

1. Goldman Sachs estimates, Gen AI will be responsible for

  • 0.4 percentage point increase in GDP growth in US.
  • 0.3 percentage point increase in OTHER DEVELOPED MARKETS
  • 0.3 percentage point increase in EMERGING MARKETS.

2. Increased ECONOMIC GROWTH is vital. According to a report by Andrew McAfee, Principal Research Scientist at MIT Sloan School, the chart below shows a direct correlation between life satisfaction (measured on a scale of 0-10) on the y axis and GDP per capita on the x axis.  It says the better the GDP the better the life expectancy.

 

3. Similarly, with Life Expectancy, and with Pollution Severity decrement. They plotted a graph with Death rate per 100k individuals from outdoor air pollution on the Y axis and GDP per capita on the X axis. Countries having better GDP are closer to X-Axis such as US, Japan South Korea, Sweden. Some countries like, Qatar, Oman, Saudi Arabia is an exception here.

4. US public companies that are more exposed to GenAI have seen their stock market valuations increase relative to less exposed firms. More exposed firms have more opportunities to improve via technology and are being valued more highly as a result.

5. Smaller companies have fallen behind in Innovation and productivity. The low-cost nature and ease of adoption will help level the playing field between small and large companies.

 

Source: The Economic Impact of Generative AI  

(https://storage.googleapis.com/gweb-uniblog-publish-prod/documents/Generally_Faster_-_The_Economic_Impact_of_Generative_AI.pdf)


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Madhumay
Deputy Manager - Research

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