AI and the Boundary of the Firm: Evidence from Radiology

Marco Francesconi and Xiaoyu Xia

No 22088, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Artificial intelligence (AI) may transform labor markets not only by changing workers' tasks but also by reorganizing production. We study radiology, where AI has spread rapidly without increasing interpretations per radiologist. In our model, AI facilitates outsourcing by letting hospitals verify the quality of remotely supplied interpretations. Using US Medicare data for 2013--2024, we document declining local radiology activity in smaller markets despite stable imaging demand. Interpretations shift toward larger markets, and radiologists at documented AI-adopting platforms end up serving more markets. AI can thus reshape firm boundaries and the geographic organization of professional work without replacing workers' tasks.

Keywords: Artificial intelligence; Labor demand; Technology adoption; Firm boundaries; Task assignment; Outsourcing (search for similar items in EconPapers)
JEL-codes: I11 J23 L22 L24 O33 (search for similar items in EconPapers)
Date: 2026-10
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