AI, Trade and Creative Destruction: A First Look

Daniel Trefler and Ruiqi Sun

No 29980, NBER Working Papers from National Bureau of Economic Research, Inc

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%.

JEL-codes: F1 F12 F14 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-big, nep-ict, nep-int and nep-tid
Note: ITI
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Citations: View citations in EconPapers (1)

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