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Data-intensive innovation and the State: evidence from AI firms in China

Beraja, Martin, Yang, David Y. and Yuchtman, Noam (2021) Data-intensive innovation and the State: evidence from AI firms in China. CEP Discussion Papers (1755). Centre for Economic Performance, LSE, London, UK.

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Abstract

Artificial intelligence (AI) innovation is data-intensive. States have historically collected large amounts of data, which is now being used by AI firms. Gathering comprehensive information on firms and government procurement contracts in China’s facial recognition AI industry, we first study how government data shapes AI innovation. We find evidence of a precise mechanism: because data is sharable across uses, economies of scope arise. Firms awarded public security AI contracts providing access to more government data produce more software for both government and commercial purposes. In a directed technical change model incorporating this mechanism, we then study the trade-offs presented by states’ AI procurement and data pro-vision policies. Surveillance states’ demand for AI may incidentally promote growth, but distort innovation, crowd-out resources, and infringe on civil liberties. Government data provision may be justified when economies of scope are strong and citizens’ privacy concerns are limited.

Item Type: Monograph (Discussion Paper)
Official URL: https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information: © 2021 The Authors
Divisions: Management
Subjects: T Technology
Q Science > QA Mathematics > QA76 Computer software
J Political Science > JQ Political institutions Asia
JEL classification: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O30 - General
P - Economic Systems > P0 - General > P00 - General
E - Macroeconomics and Monetary Economics > E0 - General > E00 - General
L - Industrial Organization > L5 - Regulation and Industrial Policy > L50 - General
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L63 - Microelectronics; Computers; Communications Equipment
O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O23 - Fiscal and Monetary Policy in Development
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
Date Deposited: 22 Mar 2022 11:24
Last Modified: 22 Mar 2022 11:24
URI: http://eprints.lse.ac.uk/id/eprint/114425

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