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AI-Generated Production Networks: Measurement and Applications to Global Trade

Author

Listed:
  • Thiemo Fetzer

    (University of Bonn & University of Warwick)

  • Peter John Lambert

    (London School of Economics and Political Science)

  • Bennet Feld

    (London School of Economics and Political Science)

  • Prashant Garg

    (Imperial College Business School)

Abstract

This paper leverages generative AI to build a network structure over 5,000 product nodes, where directed edges represent input-output relationships in production. We layout a two-step `build-prune' approach using an ensemble of prompt-tuned generative AI classifications. The 'build' step provides an initial distribution of edge-predictions, the `prune' step then re-evaluates all edges. With our AI-generated Production Network (AIPNET) in toe, we document a host of shifts in the network position of products and countries during the 21st century. Finally, we study production network spillovers using the natural experiment presented by the 2017 blockade of Qatar. We find strong evidence of such spill-overs, suggestive of on-shoring of critical production. This descriptive and causal evidence demonstrates some of the many research possibilities opened up by our granular measurement of product linkages, including studies of on-shoring, industrial policy, and other recent shifts in global trade.

Suggested Citation

  • Thiemo Fetzer & Peter John Lambert & Bennet Feld & Prashant Garg, 2024. "AI-Generated Production Networks: Measurement and Applications to Global Trade," ECONtribute Discussion Papers Series 346, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:346
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    Keywords

    Supply-Chain Network Analysis; Large Language Models; On-shoring; Industrial Policy; Trade wars; Econometrics-of-LLMs;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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