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

Erik Brynjolfsson, Xiang Hui, Meng Liu

NBER Working Paper No. 24917
Issued in August 2018
NBER Program(s):Industrial Organization, International Trade and Investment, Productivity, Innovation, and Entrepreneurship

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.

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Document Object Identifier (DOI): 10.3386/w24917