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AI-tocracy

Journal: Quarterly Journal of Economics

Date: 20230801

Author: Beraja, Martin; Kao, Andrew; Yang, David Y.; Yuchtman, Noam

Abstract:
Recent scholarship has suggested that artificial intelligence (AI) technology and autocratic regimes may be mutually reinforcing. We test for a mutually reinforcing relationship in the context of facial-recognition AI in China. To do so, we gather comprehensive data on AI firms and government procurement contracts, as well as on social unrest across China since the early 2010s. We first show that autocrats benefit from AI: local unrest leads to greater government procurement of facial-recognition AI as a new technology of political control, and increased AI procurement indeed suppresses subsequent unrest. We show that AI innovation benefits from autocrats' suppression of unrest: the contracted AI firms innovate more both for the government and commercial markets and are more likely to export their products; noncontracted AI firms do not experience detectable negative spillovers. Taken together, these results suggest the possibility of sustained AI innovation under the Chinese regime: AI innovation entrenches the regime, and the regime's investment in AI for political control stimulates further frontier innovation.

Link: Google Scholar

Key Findings

Political Unrest Drives AI Procurement

Local governments significantly increase procurement of facial-recognition AI technology following episodes of political unrest, with procurement increasing by ~0.2 standard deviations per unit increase in unrest.

AI Effectively Suppresses Unrest

Accumulation of public security AI capacity reduces the impact of conditions conducive to unrest by approximately 25%, demonstrating AI's effectiveness for political control.

Political Control Stimulates Innovation

Firms receiving politically motivated contracts increase software production by ~48.6% within two years, including both government and commercial applications.

AI Procurement Response to Political Unrest

  • Baseline OLS estimate shows 0.199-0.205 standard deviation increase in AI procurement following unrest
  • Effect remains robust across multiple specifications controlling for local economic conditions
  • IV estimates show larger effects of 0.348-0.377 standard deviations

Impact of AI on Unrest Suppression

  • High AI stock (2 SD above mean) reduces unrest response to conducive conditions by ~50%
  • Effect is stronger when AI is combined with surveillance cameras
  • No significant effect observed for non-public security AI procurement

Software Innovation Following Political Contracts

  • Total software production increases by 10 products (48.6%) within 2 years
  • Commercial software increases by 5.1 products
  • Government software increases by 3.5 products

Contribution and Implications

  • First empirical evidence of mutually reinforcing relationship between AI innovation and autocratic control
  • Demonstrates how frontier innovation can thrive under autocracy when technology enhances political control
  • Suggests China's AI sector may continue advancing without democratic reforms
  • Findings relevant for understanding global diffusion of surveillance AI technology

Data Sources

  • Procurement response chart based on Table II regression coefficients showing effects of unrest on AI procurement
  • Suppression effect visualization derived from Table IV data on interaction between weather conditions and AI stock
  • Innovation chart constructed using Table VI data on software production before and after contract receipt