IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/24917.html
   My bibliography  Save this paper

Does Machine Translation Affect International Trade? Evidence from a Large Digital Platform

Author

Listed:
  • Erik Brynjolfsson
  • Xiang Hui
  • Meng Liu

Abstract

Artificial intelligence (AI) is surpassing human performance in a growing number of domains. However, there is limited evidence of its economic effects. Using data from a digital platform, we study a key application of AI: machine translation. We find that the introduction of a machine translation system has significantly increased international trade on this platform, increasing exports by 17.5%. Furthermore, heterogeneous treatment effects are all consistent with a substantial reduction in translation-related search costs. Our results provide causal evidence that language barriers significantly hinder trade and that AI has already begun to improve economic efficiency in at least one domain.

Suggested Citation

  • Erik Brynjolfsson & Xiang Hui & Meng Liu, 2018. "Does Machine Translation Affect International Trade? Evidence from a Large Digital Platform," NBER Working Papers 24917, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24917
    Note: IO ITI PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w24917.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Melitz, Jacques & Toubal, Farid, 2014. "Native language, spoken language, translation and trade," Journal of International Economics, Elsevier, vol. 93(2), pages 351-363.
    2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    3. Liran Einav & Chiara Farronato & Jonathan Levin, 2016. "Peer-to-Peer Markets," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 615-635, October.
    4. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    5. Ajay Agrawal & Joshua Gans & Avi Goldfarb, 2019. "The Economics of Artificial Intelligence: An Agenda," NBER Books, National Bureau of Economic Research, Inc, number agra-1, March.
    6. Daron Acemoglu & Pascual Restrepo, 2018. "Artificial Intelligence, Automation, and Work," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 197-236, National Bureau of Economic Research, Inc.
    7. Lohmann, Johannes, 2011. "Do language barriers affect trade?," Economics Letters, Elsevier, vol. 110(2), pages 159-162, February.
    8. Ajay Agrawal & Joshua S. Gans & Avi Goldfarb, 2019. "Artificial Intelligence: The Ambiguous Labor Market Impact of Automating Prediction," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 31-50, Spring.
    9. Egger, Peter H. & Lassmann, Andrea, 2012. "The language effect in international trade: A meta-analysis," Economics Letters, Elsevier, vol. 116(2), pages 221-224.
    10. Blum, Bernardo S. & Goldfarb, Avi, 2006. "Does the internet defy the law of gravity?," Journal of International Economics, Elsevier, vol. 70(2), pages 384-405, December.
    11. Xiang Hui & Maryam Saeedi & Zeqian Shen & Neel Sundaresan, 2016. "Reputation and Regulations: Evidence from eBay," Management Science, INFORMS, vol. 62(12), pages 3604-3616, December.
    12. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    13. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    14. Anton Korinek & Joseph E. Stiglitz, 2018. "Artificial Intelligence and Its Implications for Income Distribution and Unemployment," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 349-390, National Bureau of Economic Research, Inc.
    15. Philippe Aghion & Benjamin F. Jones & Charles I. Jones, 2018. "Artificial Intelligence and Economic Growth," NBER Chapters, in: The Economics of Artificial Intelligence: An Agenda, pages 237-282, National Bureau of Economic Research, Inc.
    16. Daron Acemoglu & Pascual Restrepo, 2018. "Artificial Intelligence, Automation and Work," Boston University - Department of Economics - Working Papers Series dp-298, Boston University - Department of Economics.
    17. Agrawal, Ajay & Gans, Joshua S. & Goldfarb, Avi, 2019. "Exploring the impact of artificial Intelligence: Prediction versus judgment," Information Economics and Policy, Elsevier, vol. 47(C), pages 1-6.
    18. Xiang Hui & Maryam Saeedi & Giancarlo Spagnolo & Steven Tadelis, 2018. "Certification, Reputation and Entry: An Empirical Analysis," NBER Working Papers 24916, National Bureau of Economic Research, Inc.
    19. Sendhil Mullainathan & Jann Spiess, 2017. "Machine Learning: An Applied Econometric Approach," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 87-106, Spring.
    20. Jeffrey D. Sachs & Laurence J. Kotlikoff, 2012. "Smart Machines and Long-Term Misery," NBER Working Papers 18629, National Bureau of Economic Research, Inc.
    21. Meng Liu & Erik Brynjolfsson & Jason Dowlatabadi, 2018. "Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis," NBER Working Papers 25015, National Bureau of Economic Research, Inc.
    22. Andre Esteva & Brett Kuprel & Roberto A. Novoa & Justin Ko & Susan M. Swetter & Helen M. Blau & Sebastian Thrun, 2017. "Dermatologist-level classification of skin cancer with deep neural networks," Nature, Nature, vol. 542(7639), pages 115-118, February.
    23. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
    24. Agrawal, Ajay & Gans, Joshua & Goldfarb, Avi (ed.), 2019. "The Economics of Artificial Intelligence," National Bureau of Economic Research Books, University of Chicago Press, number 9780226613338, December.
    25. Chiara Farronato & Andrey Fradkin, 2018. "The Welfare Effects of Peer Entry in the Accommodation Market: The Case of Airbnb," NBER Working Papers 24361, National Bureau of Economic Research, Inc.
    26. Liran Einav & Theresa Kuchler & Jonathan Levin & Neel Sundaresan, 2015. "Assessing Sale Strategies in Online Markets Using Matched Listings," American Economic Journal: Microeconomics, American Economic Association, vol. 7(2), pages 215-247, May.
    27. David Silver & Aja Huang & Chris J. Maddison & Arthur Guez & Laurent Sifre & George van den Driessche & Julian Schrittwieser & Ioannis Antonoglou & Veda Panneershelvam & Marc Lanctot & Sander Dieleman, 2016. "Mastering the game of Go with deep neural networks and tree search," Nature, Nature, vol. 529(7587), pages 484-489, January.
    28. Avi Goldfarb & Daniel Trefler, 2018. "AI and International Trade," NBER Working Papers 24254, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ozgun, Burcu & Broekel, Tom, 2021. "The geography of innovation and technology news - An empirical study of the German news media," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    2. Joshua S. Gans, 2023. "Artificial intelligence adoption in a competitive market," Economica, London School of Economics and Political Science, vol. 90(358), pages 690-705, April.
    3. Xiang Hui, 2020. "Facilitating Inclusive Global Trade: Evidence from a Field Experiment," Management Science, INFORMS, vol. 66(4), pages 1737-1755, April.
    4. Anderton, Robert & Jarvis, Valerie & Labhard, Vincent & Morgan, Julian & Petroulakis, Filippos & Vivian, Lara, 2020. "Virtually everywhere? Digitalisation and the euro area and EU economies," Occasional Paper Series 244, European Central Bank.
    5. Dominic Chalmers & Niall G. MacKenzie & Sara Carter, 2021. "Artificial Intelligence and Entrepreneurship: Implications for Venture Creation in the Fourth Industrial Revolution," Entrepreneurship Theory and Practice, , vol. 45(5), pages 1028-1053, September.
    6. Cheng, Hua & Hu, Cui & Li, Ben G., 2020. "Lexicographic biases in international trade," Journal of International Economics, Elsevier, vol. 126(C).
    7. Mr. Andrew Berg & Lahcen Bounader & Nikolay Gueorguiev & Hiroaki Miyamoto & Mr. Kenji Moriyama & Ryota Nakatani & Luis-Felipe Zanna, 2021. "For the Benefit of All: Fiscal Policies and Equity-Efficiency Trade-offs in the Age of Automation," IMF Working Papers 2021/187, International Monetary Fund.
    8. Linh Tu Ho & Christopher Gan & Shan Jin & Bryan Le, 2022. "Artificial Intelligence and Firm Performance: Does Machine Intelligence Shield Firms from Risks?," JRFM, MDPI, vol. 15(7), pages 1-20, July.
    9. Zhu, Jun & Zhang, Jingting & Feng, Yiqing, 2022. "Hard budget constraints and artificial intelligence technology," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    10. Visser, Robin, 2019. "The effect of the internet on the margins of trade," Information Economics and Policy, Elsevier, vol. 46(C), pages 41-54.
    11. Melitz, Jacques & Toubal, Farid, 2014. "Native language, spoken language, translation and trade," Journal of International Economics, Elsevier, vol. 93(2), pages 351-363.
    12. Barbieri, Laura & Mussida, Chiara & Piva, Mariacristina & Vivarelli, Marco, 2019. "Testing the employment and skill impact of new technologies: A survey and some methodological issues," MERIT Working Papers 2019-032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    13. Liu, Jun & Chang, Huihong & Forrest, Jeffrey Yi-Lin & Yang, Baohua, 2020. "Influence of artificial intelligence on technological innovation: Evidence from the panel data of china's manufacturing sectors," Technological Forecasting and Social Change, Elsevier, vol. 158(C).
    14. Bernardo S Buarque & Ronald B Davies & Ryan M Hynes & Dieter F Kogler, 2020. "OK Computer: the creation and integration of AI in Europe," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 13(1), pages 175-192.
    15. Elizabeth Fisher & Michael A. Flynn & Preethi Pratap & Jay A. Vietas, 2023. "Occupational Safety and Health Equity Impacts of Artificial Intelligence: A Scoping Review," IJERPH, MDPI, vol. 20(13), pages 1-28, June.
    16. Jacques Melitz, 2014. "English as a Global Language," Working Papers 2014-22, Center for Research in Economics and Statistics.
    17. Rammer, Christian & Fernández, Gastón P. & Czarnitzki, Dirk, 2022. "Artificial intelligence and industrial innovation: Evidence from German firm-level data," Research Policy, Elsevier, vol. 51(7).
    18. Firat Demir & Hyeonjin Im, 2020. "Effects of cultural institutes on bilateral trade and FDI flows: Cultural diplomacy or economic altruism?," The World Economy, Wiley Blackwell, vol. 43(9), pages 2463-2489, September.
    19. Apostolos Filippas & John J. Horton & Richard J. Zeckhauser, 2020. "Owning, Using, and Renting: Some Simple Economics of the “Sharing Economy”," Management Science, INFORMS, vol. 66(9), pages 4152-4172, September.
    20. David Baqaee & Emmanuel Farhi, 2018. "The Microeconomic Foundations of Aggregate Production Functions," NBER Working Papers 25293, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:24917. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.