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Artificial Intelligence, Productivity:  Sectoral Perspective

By Prof. Khalid Wassef Al-Wazani

Professor of Economics and Public Policy

Mohammed Bin Rashid School of Government

Artificial intelligence (AI) has emerged as one of the most powerful modern drivers of productivity across economic sectors. However, its impact is not evenly distributed between service and industrial sectors; rather, it varies depending on the nature of production processes and data intensity. In service sectors, where operations rely heavily on information and human interaction, AI’s impact is both more immediate and more visible. This is particularly evident in areas such as government services, financial services, e-commerce, and healthcare. Advances in machine learning and big data analytics have enhanced service quality, accelerated decision-making processes, and improved operational efficiency, ultimately increasing the value delivered to consumers. Empirical studies indicate that AI significantly enhances human capital productivity, particularly in knowledge-intensive roles. In some cases, employees are able to save up to one hour of work per day, while service productivity improves by approximately 3% to 5%. This suggests that value creation is no longer driven solely by increasing the number of workers, but by digitally empowering them. Such developments are already influencing broader policy discussions, including the potential shift toward shorter workweeks, such as four-day work models. However, realizing this transformation requires robust digital infrastructure and advanced AI-enabled platforms capable of delivering services continuously—24 hours a day, seven days a week. This shift also has important cost-saving implications for organizations and environmental benefits through reduced commuting and lower resource consumption.

In contrast, the impact of AI in real sectors, such as industry and manufacturing, is slower but deeper. AI contributes to total factor productivity by reducing waste, optimizing supply chains, and improving product quality. Some estimates suggest that AI adoption can increase firm-level productivity by at least 2%, which is significant in production economics. In certain cases, labor productivity gains have been reported to exceed 60%. Yet, a key paradox remains: these gains do not materialize immediately. Many studies indicate that most firms have yet to experience measurable productivity improvements, reflecting a transitional phase in which investments precede tangible outcomes.

In the Arab context, the opportunity is clear; but conditional. It depends on investing in both digital infrastructure and human capital, as well as adopting innovation-driven policies. These factors will ultimately determine whether economies in the region remain consumers of technology or become producers of value through it.

In conclusion, AI does not merely redefine productivity; it reshapes who has the capability to achieve it efficiently.

Prof. Khalid W. Al Wazani