The Economic Impact of Artificial Intelligence and Digital Transformation on Employment, Productivity, and Sustainable Growth

Abstract

This study examines the economic impacts of artificial intelligence (AI) and digital transformation on employment, productivity, and sustainable growth using panel data from 85 countries over 14 years (2010–2024). Employing fixed-effects regression and instrumental variables (2SLS) approaches to address endogeneity, we analyze macroeconomic and firm-level data from World Bank, IMF, and OECD databases. Results reveal a dual-nature relationship: AI adoption significantly enhances productivity (β = 0.542, p < 0.01) and sustainable growth (β = 0.285, p < 0.01) while reducing employment (β = -0.082, p < 0.01), particularly in agriculture and manufacturing sectors. Digital transformation exhibits positive effects across all dimensions, creating employment (β = 0.124, p < 0.01) while enhancing productivity (β = 0.398) and sustainable growth (β = 0.358). The AI-digital transformation interaction amplifies benefits, indicating synergistic effects. Low-income countries demonstrate stronger AI productivity gains (β = 0.612), while high-income countries show larger interaction effects (β = 0.148). Findings support balanced technology strategies integrating AI with comprehensive digital infrastructure, worker protection programs, and education reform to achieve inclusive, productive, and sustainable economic development.