Silicon Valley and Shenzhen, China, will get all the growth from AI if other regions don’t invest now to compete

• The integration of AI-based technologies into regional economies through the manufacturing and design of goods such as smartphones and smart speakers has sparked significant changes, leading to increased efficiency, innovation and economic growth.
• This suggests that regions that actively support the development of these technologies are likely to witness a positive relationship between workforce transformation and economic growth.

Technology and creativity

• There are two significant points Florida makes about regional growth dynamics related to AI-based technologies and regional growth.
• This means that creative class members are a basic driver of regional economic growth and development.
• As an expert on regional economics, I and my colleagues studied the use of AI-based technologies and regional economic growth.

AI and economic growth

• So how do initial differences between creative regions in the use of AI-based technologies affect long-term economic growth?
• What effects do initial differences in the use of AI-based technologies between, for instance, San Francisco and Seattle have on long-term economic growth in these same cities?

Long-term growth

Consider two regions, A and B – think of A as the San Francisco Bay Area and B as Seattle. A is able to save double the amount that B does investing in an advanced AI-based technology, and A also invests twice as much as B in improving the skills of its creative workforce.

• In simple terms, even small differences in savings rates early on can lead to significant gaps in economic output per creative individual over time.
• Once again, the relatively minor initial differences in the two savings rates translate into a greatly magnified impact on the long-run values of skills per creative person.

Some policy lessons

• Second, consider a creative region that is lagging another creative region in terms of output and skills per creative person.
• For such a region to get ahead, it will need to increase its investment in AI-based technology and skills.
• Research shows that AI assets and capabilities in the U.S. are concentrated in San Francisco, San Jose, New York, Los Angeles, Boston and Seattle.

Amitrajeet A. Batabyal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.