25 Pages Posted: 30 Jul 2018 Last revised: 16 Dec 2018

Date Written: July 6, 2018

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 an upgraded 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.