The Role of Artificial Intelligence in Economic Growth: System GMM Evidence from 42 Countries

This study examines the relationship between artificial intelligence (AI) and economic growth, focusing specifically on the channels through which AI-driven innovation may affect GDP growth. AI innovation is proxies by the number of granted AI-related patents, which also reveals the strength and robustness of patent activity in this field. The econometric approach, OLS, FE, Difference and System GMM, is used to investigate the significant macroeconomic determinants, including inflation, population growth, unemployment, government expenditure, and gross fixed capital formation (GFCF). The study findings show that AI patents are negatively associated with GDP growth in this model. It suggests that, at the national level, AI-related innovations are yet to be transformed into measurable economic gains. A plausible explanation is that AI technologies remain in an initial stage of adoption and diffusion, and their implementation requires skilled labor, complementary infrastructure, and substantial upfront costs, factors that delay their productivity-enhancing effects. Besides, GFCF, government expenditure, and population growth show a significant positive effect on GDP growth across the countries. It shows the continued importance of old drivers of economic expansion, mainly inflation, demographic dynamics, public spending, and physical investment. However, mergers are a barrier to economic growth. Therefore, unemployment does not appear to exert a statistically significant impact on the model employed. The results suggest that AI's future growth is unclear and needs more study, particularly regarding how AI advances can lead to wider economic gains. For now, the data confirms that economic progress hinges on macroeconomic stability and investment; AI's potential for growth will probably emerge over time with institutional readiness and supportive economic contexts.