TRADE: WeChat with BERT: AI’s Impact on International Trade in Digital Services; Professor Daniel TREFLER (University of Toronto)

Abstract

Mobile Apps are a large and growing segment of international trade, a segment that is being transformed by AI. To document the deployment of AI in mobile apps, we use a large language model (BERT) that essentially allows a firm's app descriptions and AI patent abstracts to chat with one each and decide how related they are. We use this to show the following. (1) AI causally increases an app's foreign users i.e., increases international trade. (2) AI causally increases the number of new apps a firm offers while culling older apps i.e., AI accelerates creative destruction. (3) AI increases the welfare gains from international trade in mobile app services. We build a model that frames the empirical work and provides a cost-shifter instrument: A firm deploys AI in an app if the firm's country is ‘abundant’ in AI research and the app is in a category that is AI ‘intensive’.