NBER: Data Centers and Local Economies in the Age of AI
The National Bureau of Economic Research has released a working paper examining the impact of data centers on local economies in the context of increasing artificial intelligence demand. The study finds that while data centers can boost local employment and investment, they also raise concerns regarding electricity demand and housing prices. The research highlights the complex trade-offs that local policymakers face when considering the expansion of data centers.
- ▪Data centers are essential for cloud computing and AI, leading to increased investment and demand.
- ▪The study shows positive effects on local employment, construction, and housing prices due to data center growth.
- ▪However, the expansion of data centers also raises concerns about electricity demand and local environmental impacts.
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Home Research Working Papers Data Centers and Local Economies in the… Data Centers and Local Economies in the Age of AI: A Shift--Share Approach Fernando E. Alvarez, David Argente, Joyce Chow & Diana Van Patten Share X LinkedIn Facebook Bluesky Threads Email Link Working Paper 35194 DOI 10.3386/w35194 Issue Date May 2026 Data centers are the physical infrastructure behind cloud computing, artificial intelligence, and enterprise software. The rapid diffusion of artificial intelligence (AI) is intensifying demand for compute, accelerating investment in data centers, and raising concerns about the local economic and environmental footprint of these facilities. Their expansion creates a local policy tradeoff.
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Excerpt limited to ~120 words for fair-use compliance. The full article is at NBER.
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