Abstract

The purpose of this study is to investigate the relationship between Artificial Intelligence (AI) and economic growth as expressed by GDP, from a European perspective (EU27). By exploring two channels of impact, digital penetration and labor productivity, we aim to shed light on the AI-GDP relationship, while examining key AI drivers. Utilizing econometric techniques such as OLS for panel data, with country-fixed effects and stepwise regression, we analyze data stemming from various resources from the period: 2010–2020. Our empirical findings exert significant results. First, we find that AI technologies exert a significant and positive effect to GDP. Second, while digital inclusion practices have a significant positive effect on labor productivity, their direct impact on GDP is not observed. Additionally, we also find that digital/technology adoption practices, such as ICT professionals’ employment, AI methodology adoption, and employee reskilling, significantly improve labor productivity, ultimately driving economic growth. This study fills gaps in the literature by providing empirical evidence on the key drivers of the AI-GDP relationship in the European context.