Economic Performance in a World of ‘Unlimited Supply of Labor’ and Transformative Technology: Insights from Endogenous Growth Models

This paper analyzes the interaction of unlimited labor supply, transformative artificial intelligence (AI), and endogenous growth dynamics. We synthesize Romer (1986, 1990, 1993), Lucas (1988, 1993), and Aghion and Howitt (1992, 1998), together with the broader literature on creative destruction, to examine conditions under which growth persists as well as scenarios of stagnation or decline. The analysis highlights policy implications for both developing and industrialized economies, with particular attention to low-income countries. An illustrative case study using synthetic data—calibrated to stylized facts of Ghana, a representative lower-middle income, labor-abundant economy in sub-Saharan Africa—demonstrates how such an economy might navigate the transition to an AI-augmented growth path under three distinct policy regimes. A discussion of the substitution-versus-complementarity dimension of AI adoption shows that the mode of AI deployment, not merely its extent, is decisive for labor-market and distributional outcomes.