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Economic development

Economists Warn of "AI Poverty Traps" in Developing Nations

Strategic Insights

— 1 min read

Economists Dr. Asha Sundaram and Dr. Dennis Wesselbaum have sounded the alarm on the potential for artificial intelligence to exacerbate income inequality and create "AI poverty traps" in developing nations. In a paper titled "Economic Development Reloaded: The AI Revolution in Developing Nations," the researchers argue that the benefits of AI are unlikely to be evenly distributed, with developed countries and large corporations likely to reap the majority of the benefits, leaving developing nations in a state of technological stagnation.

Key Takeaways:

  • The concentration of AI benefits in developed countries and large corporations could lead to a widening of the global income gap.
  • The lack of access to AI and digital technologies in developing nations could create an "AI poverty trap," where these countries are unable to develop and adapt to new technologies, making it difficult for them to escape poverty.
  • Economists Dr. Asha Sundaram and Dr. Dennis Wesselbaum emphasize the need for policymakers to consider the potential risks and benefits of AI in developing nations, particularly in regards to income inequality and access to education and job training.
  • The paper highlights the importance of education and job training programs that focus on developing skills relevant to the AI economy in developing nations.
  • Dr. Sundaram and Dr. Wesselbaum's research suggests that AI can have both positive and negative effects on economic development, depending on how it is implemented and regulated.
  • Policymakers must take a proactive approach to ensuring that the benefits of AI are shared equitably and that developing nations are not left behind.

Statistics:

  • According to the paper, the global AI market is projected to reach $190 billion by 2025.
  • Developing nations account for approximately 70% of the world's population, but only 20% of global GDP.
  • The World Bank estimates that by 2030, more than three-quarters of the world's poor will live in South Asia and sub-Saharan Africa.
  • A study by the McKinsey Global Institute found that if education and job training programs focused on developing skills relevant to the AI economy were implemented in developing nations, they could boost GDP by 4% and create over 100 million new jobs.

Sources:

  • Sundaram, A., & Wesselbaum, D. (2025). Economic development reloaded: The AI revolution in developing nations. University of Auckland Business School.

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