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The limits to growth in the AI-driven economy

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Listed:
  • Hou, Yao
  • Huang, Jinglei
  • Xie, Danxia
  • Zhou, Weidi

Abstract

Artificial intelligence (AI) technology drives long-term economic growth by transforming data into ideas and accelerating innovation. However, constraints on data storage and computing power may hinder efficient data utilization, potentially limiting AI-driven endogenous growth. Using a semi-endogenous growth model that highlights data’s central role in AI-driven innovation, we characterize two potential growth patterns in the AI-driven economy: (i) growth driven by nonrival data, where the balanced growth rate is influenced by households’ privacy concerns and the significance of data in advancing the innovation frontier; and (ii) growth constrained by rival data infrastructure, with the balanced growth rate primarily determined by the efficiency of infrastructure development.

Suggested Citation

  • Hou, Yao & Huang, Jinglei & Xie, Danxia & Zhou, Weidi, 2025. "The limits to growth in the AI-driven economy," China Economic Review, Elsevier, vol. 94(PA).
    • Handle: RePEc:eee:chieco:v:94:y:2025:i:pa:s1043951x25001683
    DOI: 10.1016/j.chieco.2025.102510
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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