arXiv 2 Feb 2026 · Econometrics · 1 citations (OpenAlex)
arXiv:2602.02607 · PDF · DOI · OpenAlex · Extracted main text
This paper evaluates the causal impact of Generative Artificial Intelligence (GenAI) adoption on productivity and systemic risk in the U.S. banking sector. Using a novel dataset linking SEC 10-Q filings to Federal Reserve regulatory data for 809 financial institutions over 2018--2025, we employ two complementary identification strategies: Dynamic Spatial Durbin Models (DSDM) to capture network spillovers and Synthetic Difference-in-Differences (SDID) for causal inference using the November 2022 ChatGPT release as an exogenous shock. Our findings reveal a striking “Productivity Paradox”: while DSDM estimates show that AI-adopting banks are high performers ($β> 0$), the causal SDID analysis documents a significant “Implementation Tax” -- adopting banks experience a 428-basis-point decline in ROE as they absorb GenAI integration costs. This tax falls disproportionately on smaller institutions, with bottom-quartile banks suffering a 517-basis-point ROE decline compared to 129 basis points for larger banks, suggesting that economies of scale provide significant advantages in AI implementation. Most critically, our DSDM analysis reveals significant positive spillovers ($θ= 0.161$ for ROA, $p < 0.01$; $θ= 0.679$ for ROE, $p < 0.05$), with spillovers among large banks reaching $θ= 3.13$ for ROE, indicating that the U.S. banking system is becoming “algorithmically coupled.” This synchronization of AI-driven decision-making creates a new channel for systemic contagion: a technical failure in widely-adopted AI models could trigger correlated shocks across the entire financial network.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | LeSage, J., & Pace, R. K (2009) Introduction to Spatial Econometrics | 0.811 | 4 | 2 | 100% |
| 2 | Brynjolfsson, E., Rock, D., & Syverson, C (2021) The productivity J-curve: How intangibles complement general purpose technologies | 0.737 | 3 | 2 | 100% |
| 3 | Acemoglu, D., Ozdaglar, A., & Tahbaz-Salehi, A (2015) Systemic risk and stability in financial networks | 0.644 | 2 | 2 | 100% |
| 4 | Berg, T., Burg, V., Gombović, A., & Puri, M (2022) On the rise of FinTechs: Credit scoring using digital footprints | 0.644 | 2 | 2 | 100% |
| 5 | Brynjolfsson, E (1993) The productivity paradox of information technology | 0.644 | 2 | 2 | 100% |
| 6 | David, P. A (1990) The dynamo and the computer: An historical perspective on the modern productivity paradox | 0.644 | 2 | 2 | 100% |
| 7 | Elliott, M., Golub, B., & Jackson, M. O (2014) Financial networks and contagion | 0.644 | 2 | 2 | 100% |
| 8 | Fuster, A., Plosser, M., Schnabl, P., & Vickery, J (2019) The role of technology in mortgage lending | 0.644 | 2 | 2 | 100% |
| 9 | Solow, R. M (1987) We'd better watch out | 0.644 | 2 | 2 | 100% |
| 10 | Arkhangelsky, D., Athey, S., Hirshberg, D. A., Imbens, G. W., & Wage… (2021) Synthetic difference-in-differences | 0.511 | 2 | 1 | 100% |
Showing the top 10 of 38 scored citations.