The Macroeconomic Implications of the Gen-AI Economy

Abstract

We study the potential impact of the generative artificial intelligence (Gen-AI) revolution on the US economy through the lens of a multi-sector model in which we explicitly model the role of Gen-AI services in customer base management. In our model with carefully calibrated input-output linkages and the size of the Gen-AI sector, we find large spillovers of the Gen-AI productivity gains into the overall economy. A 10% increase in productivity in the Gen-AI sector over a 10 year horizon implies a 6% increase in aggregate GDP, despite the AI sector representing only 14% of the overall economy. That shock also implies a significant reallocation of labor away from the AI sector and into non-AI sectors. We decompose these effects into parts coming from the input-output structure and customer base management and find that they each contribute equally to the rise in GDP. In the absence of either channels, real GDP essentially does not respond to the increase in productivity in the AI sector.