The Cognitive Toll of AI: Algorithmic Over-Reliance and Macroeconomic Volatility in Institutionally Heterogeneous Emerging Economies.

The Cognitive Toll of AI: Algorithmic Over-Reliance and Macroeconomic Volatility in Institutionally Heterogeneous Emerging Economies. | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article The Cognitive Toll of AI: Algorithmic Over-Reliance and Macroeconomic Volatility in Institutionally Heterogeneous Emerging Economies. mohamed riadh cherif This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9711784/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Artificial intelligence (AI) is transforming economies, but dominant narratives treat it merely as an automation tool or productivity shock, overlooking its deeper cognitive role. This study reconceptualizes AI as Algorithmic Cognitive Augmentation (ACA)—a technology that reshapes how economic agents process information and make decisions. By bridging behavioral macroeconomics with the economics of AI, we provide the first systematic analysis of AI's impact on macroeconomic stability through cognitive rather than purely productive channels. We argue that the macroeconomic impact of ACA is nonlinear. Using a novel Cognitive Augmentation Index (CAI) for 20 institutionally heterogeneous emerging economies over 2005–2024, we employ Panel Smooth Transition Regression and Momentum Threshold Autoregression to identify a robust inverted U-shaped relationship. Moderate ACA is associated with higher total factor productivity, but beyond a critical threshold (CAI ≈ 0.41), over-reliance coincides with behavioral rigidities—automation bias, skill atrophy, and strategic homogenization—which are associated with a 15–25% higher macroeconomic volatility (95% CI: 12.4–27.8%). Crucially, these patterns are strongly conditioned by institutional context: economies with weaker governance, digital infrastructure, and human capital adaptability face lower beneficial thresholds and steeper declines. Adjustment exhibits hysteresis, meaning recovery from over-reliance is slow and asymmetric. Our findings are difficult to reconcile with the assumption that AI adoption is uniformly stabilizing. They highlight the need for context-sensitive AI governance that aligns algorithmic integration with institutional and cognitive readiness, especially in economies undergoing rapid but uneven digital transformation. JEL : O33, E32, D83, O47, C23 Artificial Intelligence Cognitive Augmentation Nonlinear Dynamics Threshold Effects Emerging Economies Behavioral Macroeconomics Algorithmic Governance Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-9711784","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":641259539,"identity":"4ff499e2-4fd0-438c-8875-4ce27a3286e6","order_by":0,"name":"mohamed riadh cherif","email":"data:image/png;base64,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","orcid":"","institution":"Faculty of Economic Sciences and Management of Tunis – FSEG TUNIS","correspondingAuthor":true,"prefix":"","firstName":"mohamed","middleName":"riadh","lastName":"cherif","suffix":""}],"badges":[],"createdAt":"2026-05-14 08:25:52","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-9711784/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-9711784/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":109759330,"identity":"fcd278a6-db52-4984-b9e9-94caf7e90635","added_by":"auto","created_at":"2026-05-22 07:26:39","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":782505,"visible":true,"origin":"","legend":"","description":"","filename":"TheCognitiveTollofAIAlgorithmicOverRelianceandMacroeconomicVolatilityinInstitutionallyHeterogeneousEmergingEconomies..pdf","url":"https://assets-eu.researchsquare.com/files/rs-9711784/v1_covered_beffb583-e28d-401b-956a-21861efaafca.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"The Cognitive Toll of AI: Algorithmic Over-Reliance and Macroeconomic Volatility in Institutionally Heterogeneous Emerging Economies.","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Artificial Intelligence, Cognitive Augmentation, Nonlinear Dynamics, Threshold Effects, Emerging Economies, Behavioral Macroeconomics, Algorithmic Governance","lastPublishedDoi":"10.21203/rs.3.rs-9711784/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-9711784/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eArtificial intelligence (AI) is transforming economies, but dominant narratives treat it merely as an automation tool or productivity shock, overlooking its deeper cognitive role. This study reconceptualizes AI as Algorithmic Cognitive Augmentation (ACA)—a technology that reshapes how economic agents process information and make decisions. By bridging behavioral macroeconomics with the economics of AI, we provide the first systematic analysis of AI's impact on macroeconomic stability through cognitive rather than purely productive channels.\u003c/p\u003e\n\u003cp\u003eWe argue that the macroeconomic impact of ACA is nonlinear. Using a novel Cognitive Augmentation Index (CAI) for 20 institutionally heterogeneous emerging economies over 2005–2024, we employ Panel Smooth Transition Regression and Momentum Threshold Autoregression to identify a robust inverted U-shaped relationship. 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