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

Author

Listed:
  • Erik Brynjolfsson

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

  • Xiang Hui

    (Marketing, Olin School of Business, Washington University in St. Louis, St. Louis, Missouri 63130)

  • Meng Liu

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

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 new machine translation system has significantly increased international trade on this platform, increasing exports by 10.9%. Furthermore, heterogeneous treatment effects are consistent with a substantial reduction in translation 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, 2019. "Does Machine Translation Affect International Trade? Evidence from a Large Digital Platform," Management Science, INFORMS, vol. 65(12), pages 5449-5460, December.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:12:p:5449-5460
    DOI: 10.1287/mnsc.2019.3388
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    More about this item

    Keywords

    artificial intelligence; international trade; machine translation; machine learning; digital platforms;
    All these keywords.

    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

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