Working Paper: NBER ID: w29980
Authors: Daniel Trefler; Ruiqi Sun
Abstract: Artificial Intelligence is a powerful new technology that will likely have large impacts on the size, direction and composition of international trade flows. Yet almost nothing is known empirically about this. One AI-enabled set of services that can be tracked resides in the palm of our hands: the Mobile Apps used by half the world's population. To analyze the impact of AI on international trade in mobile App services we merge 2014-2020 data on international downloads of mobile Apps with data on the AI patents held by each App's parent company. From this we build a measure of AI deployment. We instrument AI deployment using cost-shifters from the theory of comparative advantage: Countries with a large stock of AI expertise will have a comparative advantage producing AI-intensive Apps. We show the following IV results. (1) Bilateral Trade: AI deployment increases App downloads by a factor of six. (2) Variety Effects: AI deployment doubles the number of exported App varieties. (3) Creative Destruction: AI deployment increases creative destruction (entry and exit of Apps) and in 2020 the net effect was an increase in welfare of between 2.5% and 10.6%.
Keywords: Artificial Intelligence; International Trade; Mobile Apps; Creative Destruction; Welfare
JEL Codes: F1; F12; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AI deployment (C45) | bilateral trade flows (F10) |
| AI deployment (C45) | number of exported app varieties (F10) |
| AI deployment (C45) | creative destruction (O39) |
| AI deployment (C45) | app entry and exit (Y60) |
| AI patents (C45) | AI deployment (C45) |
| non-AI patents (O34) | bilateral trade flows (F10) |