NBER: Data Centers and Local Economies in the Age of AI (www.nber.org)

A new study published by the National Bureau of Economic Research investigates the impact of data centers on local economies as demand for artificial intelligence (AI) surges. The research reveals that while data centers generate capital investments, construction jobs, and specialized employment opportunities, they also strain local resources by increasing electricity demand and land use. Utilizing a detailed facility-level panel of data centers, the study employs innovative shift-share instruments to assess how their growth impacts U.S. counties, ultimately finding significant local economic benefits such as increased total employment, higher house prices, and enhanced tax returns. These findings underscore the dual-edged nature of data center expansion, highlighting a critical policy trade-off for local governments. As communities experience economic boosts from job creation and increased revenue, they must also address the accompanying challenges of rising electricity costs and infrastructure demands. This research serves as a vital resource for policymakers, urban planners, and the AI/ML community, emphasizing the need to balance technological growth with sustainable local development.