KISDI Publishes Report on Regional Balanced Development Strategies Centered on AI Readiness (detail)

※ URL(Korean): https://www.kisdi.re.kr/bbs/view.do?bbsSn=114803&key=m2101113055776&pageIndex=1&sc=&sw=

KISDI Publishes Report on Regional Balanced Development Strategies Centered on AI Readiness

KISDI Premium Report (25-12): Regional Balanced Development Strategies Centered on Regional AI Readiness

Balanced regional development in the AI era requires government policy focused on regions specialized in AI-utilizing industries

AI readiness measured at the municipal (si/gun/gu) level shows clear regional disparities in AI development and utilization capacity

Five key AI-utilizing industries identified: ICT, professional services, advanced manufacturing, finance, and healthcare

Non-capital regions specialized in advanced manufacturing, finance, and healthcare show productivity potential but insufficient AI readiness

Strengthening AI capacity in regions specialized in AI-utilizing industries is needed to enhance both industrial productivity and regional competitiveness

The Korea Information Society Development Institute (KISDI, President Sangkyu Rhee) recently published Regional Balanced Development Strategies Centered on Regional AI Readiness, which examines effective approaches to balanced regional development in the era of AI diffusion.

The report identifies key industries with strong links to AI technologies and high potential for productivity gains at the detailed industry level. It classifies these as five AI-utilizing industries—ICT, professional services, advanced manufacturing, finance, and healthcare—and assesses whether regions where these industries are concentrated have sufficient capacity to develop and apply AI technologies.

Drawing on the economic theory of agglomeration economies, the research explains that geographic proximity between AI producers (intermediate goods) and AI-utilizing industries (final goods) is important for efficient production through shared effects and knowledge spillovers. It suggests that geographic mismatches between AI production and AI-utilizing industries may weaken agglomeration effects and constrain productivity gains.

Accordingly, the report measures AI readiness—an index combining talent, innovation, and adoption indicators—and comparative advantage by industry (location quotient) across 229 municipalities nationwide and analyzes the relationship between these indicators.

The analysis finds that parts of Seoul and the capital region with comparative advantages in ICT and professional services show high AI readiness. In contrast, non-capital regions with comparative advantages in advanced manufacturing (e.g., Gumi and Ulsan) and in finance and healthcare (regional hub cities) exhibit relatively low AI readiness, indicating a spatial mismatch. The research suggests that such mismatches may act as bottlenecks to productivity growth in these industries.

The report also notes that these mismatches may persist or deepen if left to market forces alone. Because shared and spillover effects require coordinated movement among firms and workers, individual actors may not achieve optimal equilibrium, leading to coordination failure. In addition, self-reinforcing concentration of resources in already advanced regions may limit innovation opportunities for promising regional industries. The report therefore emphasizes the need for proactive government action to strengthen linkages between regional industrial demand and AI capabilities.

The study is significant in that it quantitatively measures AI readiness across all 229 municipalities in Korea for the first time and evaluates the efficiency of AI’s regional distribution by combining readiness indicators with industry-level comparative advantage measures. Given that agglomeration effects diminish rapidly with distance, the report underscores the importance of analysis at finer spatial levels rather than broader regional units.

As policy directions for balanced regional development in the AI era, the report emphasizes tailored AI policy design based on regional comparative advantage industries, support systems at the municipal rather than metropolitan level, and approaches that pursue both productivity growth and reduced regional inequality.

Eutteum Lee (Associate Fellow, KISDI), who led the study, stated that according to agglomeration theory, AI investment centered on regionally specialized industries can support both productivity gains and regional economic vitality. She added that policy efficiency should be improved through targeted approaches that consider local industrial contexts.

The KISDI Premium Report is available for download on the KISDI website (www.kisdi.re.kr).

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KISDI Publishes Report on Regional Balanced Development Strategies Centered on AI Readiness