An Economic Framework for Creating AI-Augmented Solutions Across Countries Over Time

Abstract

This paper examines the potential for collaboration between countries with differential resource endowments to advance AI innovation and achieve mutual economic benefits. Our framework juxtaposes economies with a comparative advantage in AI-capital and those with a comparative advantage in tech-labor, analyzing how these endowments can lead to enhanced comparative advantages over time. Through the application of various production functions and the use of Edgeworth boxes, our analysis reveals that strategic collaboration based on comparative advantage can yield Pareto improvements for both developed and developing countries. Nonetheless, this study also discusses the challenges of uneven benefit distribution, particularly the risk of “brain drain” from developing nations. Contributing to the discourse on the economics of AI and international collaboration, this study highlights the importance of thoughtful strategic planning to promote equitable and sustainable AI development worldwide.