Artificial Intelligence, Economic Growth and Regional Disparities: Reduced-Form Evidence and Quantitative Spatial Model

China's regional economic development is clearly differentiated and the polarization phenomenon is prominent at the present. What impact does the rapid penetration of artificial intelligence (AI) bring to economic growth and regional disparities in this context? This paper applies a difference model to identify the reduced-form relationship between AI and economic growth by using city-level data. It finds that AI significantly boosts economic growth. This conclusion is robust to a series of sensitivity tests and to the way dealing with endogeneity issues. In order to further analyze the impact of AI on regional as well as national economies, a multi-region quantitative spatial model is developed. The simulation analysis shows that AI increases employment, wages, and per capita output while reduces its production costs and prices in the region shocked. AI also facilitates trade and migration among regions. If each region adopts the same rate of AI penetration, national GDP and welfare both increase, but regional disparities in output per capita widens at the same time.