<p>This study examines how artificial intelligence (AI) investments and governance quality affect economic growth and employment across 33 countries from 2012–2022. Using Principal Component Analysis (PCA) to construct governance indices and applying FMOLS and DOLS estimations, along with Fixed-Effects (FE) models with Driscoll–Kraay standard errors as a robustness check, the study finds that AI investments stimulate economic growth. However, the study also infers that AI’s ability to promote the objectives of SDG 8 for decent work is not guaranteed by growth alone, as its employment effects depend significantly on governance quality. Strong governance lowers the risk of job losses due to automation and helps people develop their skills. The findings provide policy insights for the formulation of governance frameworks that optimize the economic advantages of AI while fostering inclusive employment. Causality analysis reveals a bidirectional relationship between AI and governance, suggesting that while effective governance accelerates AI diffusion, AI adoption also reinforces institutional performance through greater transparency and accountability. This study proposes distinct policy recommendations: advanced and emerging economies should align AI investments with existing governance frameworks and adopt measures to reduce governance-related risks. At the same time, they must strengthen institutional capacity and governance structures to fully harness the developmental potential of AI.</p>