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

This paper develops a multi‐sector growth model to analyse the general equilibrium effects of generative artificial intelligence (GenAI) on growth, structural transformation and international trade. It introduces a crucial distinction between high‐skill, high‐income, highly digitalized, tradable services and low‐skill, less digitalized, less‐tradable services, allowing GenAI to differentially affect sectors through both supply‐side productivity gains and demand‐side shifts in consumer preferences. The model generates testable implications consistent with emerging empirical evidence and delivers several novel predictions. Unless GenAI adoption is broad‐based and accompanied by the creation of new products that shift demand toward skill‐intensive activities, its aggregate growth effects are likely to be modest. The paper highlights the risk of ‘premature de‐professionalization’—a contraction in the capacity of economies, particularly developing ones, to generate well‐paid jobs in high‐skill services. This process is primarily driven by domestic general equilibrium forces, as productivity gains in high‐skill sectors may outpace demand expansion and reduce labour absorption. International trade plays a critical amplifying role in shaping both the timing and severity of this process: falling global relative prices of high‐skill tradable services, combined with delayed AI adoption, can erode comparative advantage and lock countries into low‐skill, low‐income specializations. In this respect, premature de‐professionalization parallels the well‐documented phenomenon of premature de‐industrialization, but operates through high‐skill services rather than manufacturing—potentially narrowing development pathways at earlier stages of income.