Policy Research Working Paper 9024 World Development Report 2020 Background Paper Is 3D Printing a Threat to Global Trade? The Trade Effects You Didn’t Hear About Caroline Freund Alen Mulabdic Michele Ruta Development Economics Macroeconomics, Trade and Investment Global Practice September 2019 Policy Research Working Paper 9024 Abstract In the mid-2000s, the production of hearing aids shifted middle- and high-income countries. The analysis also finds almost entirely to 3D printing. Using difference-in-differ- that developing countries increased their imports of hearing ences and synthetic control methods, this paper examines aids as a result of the innovation, benefitting consumers. As the effects of this shift on trade flows. The analysis finds a robustness check, the paper examines 35 products that that trade increased roughly 60 percent following the intro- are partially 3D printed and finds positive and significant duction of 3D printing. Revealed comparative advantage effects on trade. The results counter widespread views that was reinforced, with exports growing most rapidly for 3D printing will shorten supply chains and reduce trade. This paper is a product of the Macroeconomics, Trade and Investment Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at cfreund@worldbank.org, amulabdic@worldbank.org, and mruta@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team Is 3D Printing a Threat to Global Trade? The Trade Effects You Didn’t Hear About† Caroline Freund, Alen Mulabdic, Michele Ruta∗ World Bank Keywords: 3D Printing, Trade, Comparative Advantage, Developing Countries JEL Codes: F14, O33 † We are grateful to Simeon Djankov, Nuno Limão, Aaditya Mattoo, Denis Medvedev, Erik Van der Marel, and seminar participants at the World Bank and the workshop on “Europe 4.0: Sharing the New Economy” for helpful comments and suggestions. Errors are our responsibility only.  World Bank, 1818 H Street, Washington DC, USA. Caroline Freund, Email: cfreund@worldbank.org; Alen Mulabdic, Email: amulabdic@worldbank.org; Michele Ruta, Email: mruta@worldbank.org. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. 3D PRINTING AND TRADE 2 1. Introduction Will 3D printing disrupt world trade? The new technology has been accompanied by predictions of a future where goods will be printed locally, global supply chains will be shortened, and international trade will be dramatically reduced. Firms (and perhaps even consumers) will be able to create a solid three-dimensional object from a digital file and will no longer need to import printable goods and components. One study finds that as much as 40 percent of trade could be eliminated by 2040.1 In contrast, many earlier improvements in production processes that have reduced production costs and/or improved quality have boosted international trade. The industrial revolution is perhaps the best example, where a transformation in technology and management practices brought huge productivity gains, output growth, and expanding trade. The impact of 3D printing technology on world trade is therefore an empirical question. Early evidence suggests that firms (and countries) will continue to specialize and 3D printing will stimulate trade growth. While 3D printing allows product customization, it does not beat traditional manufacturing technologies for bulk production of simple items. Even for the specialized products where it is most effective, it is not leading to decentralized production. One example comes from dentistry, where custom products are in high demand but are being manufactured and exported by high-tech firms. Consider Renishaw, a British engineering company, that makes dental crowns and bridges from digital scans of patients’ teeth. The printers run for 8-10 hours to make custom teeth from cobalt-chrome alloy powder, which are then exported. Dentists are not installing the machines to print teeth locally, rather the parts are shipped to dental labs in Europe, where a layer of porcelain is added before the teeth are shipped to dentists.2 With 3D printing, the production process changed but the supply chain remains intact. In addition to teeth, the innovative technology is also being used for several other goods, from running shoes to prosthetic limbs. The good where 3D printing is most common is hearing aids. Nearly 100 percent of all hearing aids consumed in the world are produced using 3D printing.3 3D printers transformed the hearing aid industry in less than 500 days in the mid-2000s, which makes this product a unique natural experiment to assess the trade effects of this technology. In particular, we use the example of hearing aids to examine the effects of 3D printing on international trade and to study how trade patterns have changed as production technologies shifted. Beyond this specific example, we also investigate trade in other goods where the use of 3D printing is expanding. The main result is that 3D printing leads to an increase in world trade. We examine the data in two ways, first using a standard difference-in-difference technique and comparing the growth in hearing aid trade to other similar products. Second, we use synthetic controls. The results show that the development of 3D printing led to an increase in trade of 58 percent over nearly a decade, relative to the baseline. A dynamic extension of our model shows that the impact 1 ING Report (Leering, 2017) https://www.ingwb.com/media/2088633/3d-printing-report-031017.pdf 2 “A printed smile,” The Economist, 28-Apr-2016.https://www.economist.com/science-and- technology/2016/04/28/a-printed-smile 3 See Banker (2013). 3D PRINTING AND TRADE 3 on trade follows the large expansion of 3D printing in the hearing aid industry in 2007. Our results also indicate that comparative advantage is strengthened and the countries that appear to benefit the most from the introduction of the new technology are advanced and middle-income economies. When we study the impact on imports, results show that there is a stronger effect on developing countries, particularly low-income countries, pointing to welfare gains on the consumption side for these economies. The intuition for the results is that 3D printing led to a reduction in the cost of production. Demand rose and trade expanded. There is no evidence that 3D printing shifted production closer to consumers and displaced trade. One reason is that hearing aids are light products which makes them relatively cheap to transport internationally -we come back to this point below. A second reason is because printing hearing aids in high volumes requires a large investment in technology and machinery and the presence of highly specialized inputs and services. The countries that were early innovators, Denmark, Switzerland and Singapore, remain the main export platforms. Some middle-income economies such as China, Mexico and Vietnam have also been able to substantially increase their market shares between 1995 and 2015. As a result, exports did not become more concentrated in the top producing countries following the introduction of 3D printing. While these results are specific to hearing aids, the insights may be more general. We also examine 35 other products that are increasingly being 3D printed and find similar patterns. These budding 3D products have also experienced faster trade growth than otherwise similar goods. In contrast to the results for hearing aids, there is some evidence of disruption in comparative advantage which indicates that there might be differences across products that deserve further investigations as more data become available. We also investigate the extent to which the weight of 3D printable products affects our main result. Interestingly, we find that the positive effect of 3D printing on trade decreases with product weight and could even reverse for bulky products. These results suggest that while the technology appears to boost trade on average, it may be used to produce goods closer to consumers for products with high transport costs.4 This paper contributes to the literature on how new technologies affect international trade. Despite the large debate in the specialized press,5 to our knowledge this is the first paper that empirically investigates the impact of 3D printing on trade. Goldfarb and Tucker (2017) have a recent survey of the literature on digital economics, which does not review any paper on 3D printing. The paper is organized as follows. The next section describes 3D printing in hearing aids. Section 3 reports results for the difference-in-difference methodology. Section 4 reports results using synthetic controls. Section 5 explores other products that are being 3D printed. And Section 6 concludes. 4 Ideally, we would want to test the extent to which a second feature of hearing aids -the presence of relevant economies of scale- matters to explain the impact of 3D printing on trade. The presumption is that the production of products that are less subject to economies of scale can be more easily fragmented, leading to less trade. Unfortunately, differently from product weights, data on scale elasticities are not available at the level of disaggregation needed for this analysis. 5 See the next section for a discussion on hearing aids as an example. 3D PRINTING AND TRADE 4 2. 3D printing in hearing aids The hearing aid industry is unique in its virtually complete and rapid switch from traditional manufacturing to 3D printing. According to one observer, not one company that stuck to traditional manufacturing methods survived (d’Aveni, 2014). Despite attempts in the late 1980s and early 1990s, the 3D printing technology did not mature until the early 2000s. Importantly, the more efficient technology was adopted in fewer than 500 days (e.g., see Figure 1 for 3D printing adoption for the largest firm),6 reducing production steps from nine to three: scanning, modeling, and printing (Sharma, 2013). Three major inventions marked a turning point. First, in 2001, two Danish graduate students developed a prototype of a 3D scanner, which was used to scan hearing aid shells (Sandström, 2016). Widex – one of the three Danish hearing aid manufacturers – immediately signed an agreement for the development of a scanner. In addition to the scanner, the students also developed the software and founded 3Shape, a company that now controls 90 percent of the market for scanners and software for 3D printing. Second, a German firm, Dreve Materials, launched in 2002 a biocompatible material suitable for 3D printing processes of hearing aids. Finally, in 2005 EnvisionTEC, a producer of 3D printers, sold its first Selective Modulation printer to Phonak, a producer of hearing aids. After a period of trial and error, the new printer finally allowed hearing aid manufactures to produce shells similar in terms of color and material to the traditional ones. As the technology changed, there was a wave of industry consolidation. In 2006, the Phonak Group became the largest producer, after acquiring GN ReSound and the adoption of the technology spread rapidly.7 6 Other companies switched to 3D printing during the same period. For instance, GN ReSound explored the technology in 2002 and by 2008 it transitioned 90 percent of its production to 3D printing (Sandström, 2016). 7 ““Big-6″ to Become “Big-5″ as R&D Costs Drive Consolidation,” The Hearing Review, 1-Oct-2006. http://www.hearingreview.com/2006/10/big-6-to-become-big-5-as-rd-costs-drive-consolidation/ 3D PRINTING AND TRADE 5 Figure 1: Adoption of 3D Printing for custom hearing aids at Phonak Source: Brans (2013) The new technology fundamentally changed the industry because it produced a better product at a lower cost. The change is visible in US import price data and hearing aid usage. The United States is the number one importer of hearing aids and has relatively accurate data on unit prices. Figure 2, shows that the unit value of hearing aids imported into the United States dropped by around 25 percent after 2007, right around when the technology was adopted.8 Hearing aid usage also increased dramatically. From 2001 to 2008 only about 26 percent of the population above 70 with hearing loss used hearing aids, and the share was flat over the period. From 2008 to 2013 (last year of data), the share increased to 32 percent (Office of Disease Prevention and Health Promotion, US Government). Despite the potential benefits from the use of hearing aids, stigma, discomfort and cost had been among the most frequent reasons for rejecting the use of hearing instruments (Van den Brink et al., 1996). Two factors related to 3D printing could have contributed to the increased usage of hearing aids. First, improved quality: the high level of customization and cosmetic improvement achieved with the use of the technology, which reduced the stigma and discomfort. Second, the reduced cost of production of a high-quality product which resulted in lower prices. 8 However, according to the President’s Council of Advisors on Science and Technology (PCAST), price reductions were only in part transmitted to consumers who typically pay more than $2,300 for just one hearing aid. https://obamawhitehouse.archives.gov/blog/2015/10/26/%E2%80%8Bpcast-recommends- changes-promote-innovation-hearing-technologies 3D PRINTING AND TRADE 6 Figure 2: Unit Value of Hearing Aids (US Import data from UN Comtrade) The advent of 3D printers has not fundamentally affected the industry’s market structure. The hearing aid industry has been dominated for the past 15 years by six companies who control about 99 percent of the global market (Sandström, 2016). In terms of location of production and consumption, trade data show that 3D printing led to a reduction in export concentration, especially among the top 3 exporters (Figure 3). The export share of the world’s largest top three exporters of hearing aids declined from 65 in the early 2000s to 52 today, reversing a trend of increasing consolidation from the mid-1990s to the early 2000s. Figure 3 shows the decrease in export concentration, especially between the periods 2002-2004 and 2014-2016, at the top of the distribution. In contrast, imports became slightly more concentrated, though the trend over time remained the same from 1990s to the 2000s and from the 2000s to the 2010s. Consumption of hearing aids is less concentrated than production. The import share of the top 10 largest importers was 69 percent in 1995-1997 and it increased to 73 percent in 2014-2016.9 9 While the cost of 3D printers per se, which is around $150,000, may not be high enough to justify the persistency of high levels of market concentration, there are other complementary technologies such as 3D scanners and software for three-dimensional modeling and, especially, requirements for technical competencies that make the industry subject to internal and external economies of scale. Sandström (2016) reports that the technicians’ visual capabilities to optimize hearing aid she lls (e.g. fitting the electronics component) remained largely intact with the use of 3D printing in the industry. 3D PRINTING AND TRADE 7 Figure 3: Evolution of export and import concentration Before moving to the formal analysis, we take a first look at the trade data. Prima facie evidence supports the view that, rather than disrupting international trade flows, 3D printing boosted trade in hearing aids. Figure 4 shows that trade in hearing aids, HS code 902140, increased more than total trade in chapter 90 (optical, photographic, cinematographic, measuring, checking, medical or surgical instruments and apparatus; parts and accessories) and more rapidly than in the high-tech products listed in Appendix Table 5. We find that the divergence happened around 2007, precisely when the 3D printing technology was being adopted, and that distance between the series remained constant afterward. In the next sections, we investigate this relationship more formally, identifying the causal impact of 3D printing on trade using differences-in-differences and synthetic control methods. Figure 4: Evolution of trade in goods 3D PRINTING AND TRADE 8 3. Differences-in-Differences In this section, we study the impact of 3D printing on international trade flows using a differences-in-differences method. We ask the data four main related questions: what the impact of the new technology is on hearing aids’ (i) average exports; (ii) comparative advantage; (iii) exports of countries at different level of developments; and (iv) imports. In the simplest case, 3D printing would reduce trade if countries shifted from importing hearing aids to printing them. However, it could also affect comparative advantage, leading to a change in trade patterns, but no end to trade. In a standard Heckscher-Ohlin framework, the introduction of 3D printing technology would reduce the labor intensity of production. As a result, exports would shift to more capital abundant countries. The overall reshuffling of exports would also depend on the presence of economies of scale. Finally, the new technology reduced production costs and increased product quality, suggesting there should be greater demand, more production, and potentially more trade. We begin by identifying the effect of 3D printing on trade by comparing hearing-aid exports before and after 2007 – the year production technology shifted – to exports of other products. The underlying assumption is that, controlling for other determinants of trade, trade in hearing aids would have moved in parallel to other products in the absence of the 3D printing technology. Thus, any divergence in hearing aids trade after 2007 is attributable to 3D printing. To formally investigate the relationship between 3D printing and trade, we estimate the following equation: = + + ∗ ( 2007) + (1) where is country i’s log of exports of HS 6-digit product within category product in year 10 . ( 2007) is an indicator variable which takes value 1 for HS code 902140 “hearing aid” from year 2007 onward – the year in which the technology became widely used in the production of hearing aids (see Section 2). and are country-product and country-year fixed effects, respectively. Country-product dummies capture the effect of time-invariant characteristics that determine the level of exports, including secular productivity and endowment differences that can determine the specialization trade patterns. While country-year fixed effects account for country specific shocks common to all products, including country-specific macroeconomic conditions. 10 We use product level bilateral trade data from WITS (UN Comtrade) reported at the 6-digit level in the HS 1988/92 classification for the period 1995-2016 . As common in the literature, we drop countries with population less than 5 million. Additionally, we keep only countries for which the World Bank provides information on the income level (see Table 9 or https://datahelpdesk.worldbank.org/knowledgebase/articles/378834-how-does-the-world-bank-classify- countries). The available data cover 117 countries and 330 products that are either classified as high-tech (see Table 5) or in HS chapter 90. 3D PRINTING AND TRADE 9 The coefficient on the indicator variable, , captures differences in changes in export of hearing aids that are due to the introduction of the 3D printing technology. If the technology allows for the disaggregation of production, with printing performed geographically close to consumers (as it is implicitly assumed in recent reports -see the Introduction), the coefficient should be negative. On the other hand, if 3D printing, similarly to other technologies, expands quality or lowers prices, trade should expand, and the coefficient would be positive. The econometric analysis shows that the average impact of 3D printing on trade in hearing aids is positive and statistically significant (Table 1). The results in the first column of Table 1 indicate that as hearing aids became 3D printed trade flows increased by up to 78 percent. The results are robust to using products that are high-tech and/or under HS chapter 90 in the control group. In our preferred specification, we compare trade in hearing aids to other high-tech products in HS chapter 90 – optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus. These are products with similar R&D and technology intensity that are likely to be subject to similar demand and supply shocks as hearing aids. In this specification, we find that 3D printing increases trade by 58 percent (from column 4, exp(0.456)-1). This effect could be interpreted as a lower bound, as there is evidence of 3D printing being used to some extent for the production of other high-tech products within chapter 90.11 Table 1: Effects of 3D printing on exports in hearing aids (1) (2) (3) (4) Sector control HS Ch. 90 or HS Ch. 90 High-tech HS Ch. 90 and High-tech High-tech VARIABLES log(exports) log(exports) log(exports) log(exports) (Hearing Aid 2007-) 0.580*** 0.550*** 0.561*** 0.456*** (0.158) (0.157) (0.159) (0.157) Observations 476,248 234,932 360,007 118,678 R-squared 0.847 0.859 0.844 0.862 Period 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES Country-Product FE YES YES YES YES % Zeroes .44 .40 .44 .37 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1 11 For instance, orthopedic appliances and other artificial parts of the body. 3D PRINTING AND TRADE 10 As a second step, we test for dynamic effects and perform a robustness check on the treatment year, we estimate the following equation: 2016 = + + ∑ ∗ ( ∗ ) + (2) =1996 where the coefficients on the interactions between and the year dummy variables, , capture the yearly difference between trade in hearing aid and other products with respect to the difference in 1995 the excluded category due to the collinearity with country-product, , fixed effects. The results when we estimate equation (2) are presented in Figure 5 which shows the coefficients of the interaction term for different years. We find that trade in hearing aids diverged markedly from non-3D products after 2007 – i.e., when the technology started to be adopted – irrespectively of the control group. There is also some evidence of trade increasing around 2004, when the technology was already deployed in the production of hearing aid shells, although only for a fraction of production (see Figure 1). Trade in hearing aids progressively diverged in years subsequent to 2007 (with peaks in 2011 and 2016), consistently with the view that the technology allowed to reduce costs and improve quality leading to increasing sales over time. 3D PRINTING AND TRADE 11 Figure 5:Dynamic effects Panel A: HS Ch. 90 or High-tech Panel B: HS Ch. 90 Panel C: High-tech Panel D: HS Ch. 90 and High-tech In Table 2 we study the impact of 3D printing on exports of countries with different levels of revealed comparative advantage (RCA). As 3D printing weakened the comparative advantage in hearing aids of labor abundant countries, one might expect a reshuffling in comparative advantage in the years after the diffusion of the new technology. Results in Table 2 fail to support this view. Columns 1 to 4 suggest that 3D printing had stronger effect on countries with a comparative advantage, although the effect was not statistically different from countries with a comparative disadvantage. In columns 5-8, we explore the effect on different groups in more detail. Countries with RCA>1 are split into two groups, those with revealed comparative advantage above the median (given RCA>1) and those with revealed comparative advantage below the median. Similarly, for countries with RCA<1. We find that countries with a small comparative advantage (Dummy Low RCA 1995-2000 > 1 in columns 5 to 8) –benefitted the most. 3D PRINTING AND TRADE 12 Table 2: Effects of 3D printing on RCA in hearing aids (1) (2) (3) (4) (5) (6) (7) (8) Sector control HS Ch. 90 or HS Ch. 90 High-tech HS Ch. 90 and HS Ch. 90 or HS Ch. 90 High-tech HS Ch. 90 and High-tech High-tech High-tech High-tech VARIABLES log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) (Hearing Aid 2007-) 0.562*** 0.532*** 0.545*** 0.442*** (0.171) (0.170) (0.172) (0.170) (Hearing Aid 2007-)*(Dummy RCA 1995-2000 > 1) 0.230 0.225 0.213 0.167 (0.227) (0.233) (0.235) (0.265) (Hearing Aid 2007-)*(Dummy Low RCA 1995-2000 < 1) 0.551* 0.476* 0.544* 0.377 (0.289) (0.283) (0.291) (0.277) (Hearing Aid 2007-)*(Dummy High RCA 1995-2000 < 1) 0.566*** 0.551*** 0.545*** 0.464** (0.207) (0.206) (0.208) (0.208) (Hearing Aid 2007-)*(Dummy Low RCA 1995-2000 > 1) 0.981*** 0.964*** 0.952*** 0.851*** (0.149) (0.150) (0.161) (0.190) (Hearing Aid 2007-)*(Dummy High RCA 1995-2000 > 1) 0.508*** 0.448*** 0.467*** 0.248 (0.153) (0.168) (0.180) (0.263) Observations 476,248 234,932 360,007 118,678 476,248 234,932 360,007 118,678 R-squared 0.847 0.859 0.844 0.862 0.847 0.859 0.844 0.862 Sum of coefficients .792*** .757*** .758*** .609*** 2.606*** 2.439*** 2.508*** 1.939*** Period 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES YES YES YES YES Country-Product FE YES YES YES YES YES YES YES YES % Zeroes .44 .4 .44 .37 .44 .4 .44 .37 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1 3D PRINTING AND TRADE 13 In Table 3 we investigate the impact of 3D printing on countries at various stages of development. Results in columns 1 to 4 suggest that 3D printing had a similar impact on trade of developing and developed countries. However, when we use a finer disaggregation for developing countries, we find heterogenous effects. In columns 5-8 we find that 3D printing particularly benefitted exports of upper middle-income economies and high-income countries, while it had a negative impact on exports from low-income economies.12 In sum, we find that only emerging and advanced economies appear to have benefited from the new technology, consistent with the new technology being relatively less labor intensive. 12 See Appendix Table 8. 3D PRINTING AND TRADE 14 Table 3: Effects of 3D printing on exports in hearing aids for countries at different levels of development (1) (2) (3) (4) (5) (6) (7) (8) Sector control HS Ch. 90 or HS Ch. 90 High-tech HS Ch. 90 and HS Ch. 90 or HS Ch. 90 High-tech HS Ch. 90 and High-tech High-tech High-tech High-tech VARIABLES log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) (Hearing Aid 2007-) 0.584*** 0.583*** 0.560*** 0.501*** (0.190) (0.193) (0.190) (0.193) (Hearing Aid 2007-)*(Dummy Developing) -0.007 -0.061 0.002 -0.085 (0.310) (0.309) (0.311) (0.311) (Hearing Aid 2007-)*(Dummy Low income) -0.744 -0.870* -0.780 -1.111** (0.481) (0.477) (0.478) (0.462) (Hearing Aid 2007-)*(Dummy Lower middle income) 0.503 0.501 0.488 0.435 (0.453) (0.438) (0.464) (0.457) (Hearing Aid 2007-)*(Dummy Upper middle income) 0.929*** 0.843*** 0.919*** 0.728*** (0.290) (0.294) (0.285) (0.279) (Hearing Aid 2007-)*(Dummy High income) 0.584*** 0.583*** 0.560*** 0.501*** (0.190) (0.193) (0.190) (0.193) Observations 476,248 234,932 360,007 118,678 476,248 234,932 360,007 118,678 R-squared 0.847 0.859 0.844 0.862 0.847 0.859 0.844 0.862 Sum of coefficients .577** .522** .562** .416* 1.272* 1.057 1.188 .553 Period 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES YES YES YES YES Country-Product FE YES YES YES YES YES YES YES YES % Zeroes .44 .4 .44 .37 .44 .4 .44 .37 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1 3D PRINTING AND TRADE 15 Finally, we estimate equation (1) on the log of imports. This specification allows to understand which consumers are benefitting from the technology by expanding their demand for hearing aids. In addition, a focus on imports has two advantages. First, the share of zero trade flows, especially for the hearing aid industry, is lower, as a higher number of countries consume hearing aids than produces them.13 Second, this specification serves as an additional robustness test in terms of the 3D printing treatment. Given that a small number of exporting countries dominate the hearing aid industry, effects may not be widespread, or a few outliers could drive results. Imports are likely to be affected to a greater extent across a wider number of countries. Overall the estimates on the impact of hearing aids on imports are qualitatively similar to those found for exports, however there are some quantitative differences. Results in column 1 of Table 4 suggest that 3D printing increases imports by 104 percent while the impact on exports, for the specification that uses high-tech products within chapter 90, suggests an increase by around 58 percent. We find that countries with a large revealed disadvantage (i.e., Dummy Low RCA 1995- 2000 < 1 equal to one), countries unlikely to produce hearing aids domestically, import disproportionately more after the introduction of 3D printing. Column 4 shows that there is stronger impact on developing countries’ imports. Column 5 shows that the impact of 3D printing on imports is uniform across developing countries with a marginally stronger impact on low income economies. These findings suggest that the 3D innovation made hearing aids more available to developing country residents with hearing loss. In summary, this section documents a strongly positive impact of 3D printing on trade using differences-in-differences techniques. The results show that the technology allowed producers, especially in upper middle- and high-income countries, to increase their export competitiveness. As a result, this increase in competitiveness benefited consumers in developing countries that increased their imports of hearing aids. 13 Indeed, the last row of Table 4 shows that the share of zeroes, 28 percent, is smaller than the one for exports which ranges between 37 and 44 percent. 3D PRINTING AND TRADE 16 Table 4: Effects of 3D printing on imports (1) (2) (3) (4) (5) Sector control HS Ch. 90 and HS Ch. 90 and HS Ch. 90 and HS Ch. 90 and HS Ch. 90 and High-tech High-tech High-tech High-tech High-tech VARIABLES log(imports) log(imports) log(imports) log(imports) log(imports) (Hearing Aid 2007-) 0.715*** 0.715*** 0.493*** (0.068) (0.072) (0.084) (Hearing Aid 2007-)*(Dummy RCA 1995-2000 > 1) -0.004 (0.164) (Hearing Aid 2007-)*(Dummy Developing) 0.351*** (0.124) (Hearing Aid 2007-)*(Dummy Low RCA 1995-2000 < 1) 0.989*** (0.117) (Hearing Aid 2007-)*(Dummy High RCA 1995-2000 < 1) 0.545*** (0.082) (Hearing Aid 2007-)*(Dummy Low RCA 1995-2000 > 1) 0.724*** (0.117) (Hearing Aid 2007-)*(Dummy High RCA 1995-2000 > 1) 0.694** (0.319) (Hearing Aid 2007-)*(Dummy Low income) 0.891*** (0.171) (Hearing Aid 2007-)*(Dummy Lower middle income) 0.812*** (0.139) (Hearing Aid 2007-)*(Dummy Upper middle income) 0.860*** (0.150) (Hearing Aid 2007-)*(Dummy High income) 0.493*** (0.084) Observations 137,376 137,376 137,376 137,376 137,376 R-squared 0.907 0.907 0.907 0.907 0.907 Sum coefficients .715*** .711*** 2.951*** .843*** 3.056*** Period 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES YES Country-Product FE YES YES YES YES YES % Zeroes .28 .28 .28 .28 .28 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1 3D PRINTING AND TRADE 17 4. Synthetic Control Method (SCM) In this section we complement the differences-in-differences analysis from the previous section with a Synthetic Control Method (SCM) first developed by Abadie and Gardeazabal (2003) and refined by Abadie et al. (2010, 2013). This method offers two main advantages over a differences-in-differences approach. First, the SCM allows for a data-driven selection process of suitable control groups. Second, the framework allows for the effect of confounding factors on the outcome variable to vary over time. The idea behind the method is to obtain for each treated unit a synthetic control by using a weighted average of untreated units to match the observable characteristics and pretreatment outcome of the treated unit. Thus, the method should be less subject to the omitted variables bias typical of a differences-in-differences estimation. Synthetic control methods have been mostly used in the context of a single treated unit. For instance, Abadie and Gardeazabal (2003) study the economic impact of terrorism in the Basque region.14 Billmeier and Nannicini (2013) are an early exception, they assess the impact of several episodes of economic liberalization on real GDP per capita, but do not estimate average effects. More recently, the method has been extended to multiple treatments. Cavallo et al. (2013) examine the short and long run consequences of natural disasters. While Acemoglu et al. (2016) estimate the value of political connections for all firms trading on the NYSE and Nasdaq. The paper contributes to the SCM literature by determining the statistical significance of the treatment effects using the permutation method developed by Cavallo et al. (2013) and limiting it to 5,000 randomly drawn placebo treatment groups as in Acemoglu et al. (2016). Following Cavallo et al. (2013), we define the significance level (p-value) at each post treatment period l as ̅̅̅̅ () ∑=1 ̅ (| ̅ |) | ≥ | (3) - = ̅ Pr(| | ̅ |) = ≥ | ̅̅̅̅ where ̅ is the weighted average of the treatment effects of the treated units with weights being the inverse of the pre-treatment root mean squared error. As each treated unit may use different set of controls, we assign to each of these controls a random treatment in the same period as the treated unit to obtain a placebo effect. For each treated unit we then select a random placebo effect and aggregate all the selected effects using the inverse of the pre-treatment root mean squared error as weights and repeat the procedure 5,000 times. To implement the SCM analysis we need to select the pool of possible controls to use and identify the characteristics to be matched. For each country, a synthetic control is constructed using the country’s exports of high-tech products within HS chapter 90. In terms of characteristics, we use lagged outcome variables: 1995, 2000, and 2005. For instance, we use a combination of German exports of high-tech sectors within chapter 90 to construct a synthetic control for exports of hearing-aids for Germany. This allows us to control for country specific time-varying shocks such as financial crises and the unemployment rate. 14 See also Caselli (2017) who uses synthetic control methods to evaluate the impact of an exchange rate intervention on inflation in the Czech Republic. 3D PRINTING AND TRADE 18 Note that a downside of this approach is that the synthetic control method requires data for treated units over the entire sample period for matching purposes. Therefore, our sample needs to be composed of continuous exporters of hearing aids, limiting the analysis to 33 countries. To compare more clearly the results with the analysis in the previous section, Table 10 reports the results for the difference-in-difference specification used in Section 3 (equation 1) for the sample of 33 countries of the SCM analysis. As it appears from Table 10, results from this subsample of countries are not different from the results in Section 3. This suggests that potential differences between the difference-in-difference approach and the SCM analysis are not likely to be driven by the more restricted sample in the latter. Figure 6 presents the average effect pooling all the 33 countries together. The difference between the hearing aid series and the synthetic control is directly comparable to the coefficients reported in Table 1 – as both capture the treatment effect on the logarithmic transformation of exports. First, we find 3D printing increased trade by around 56 percent in 2016.15 The magnitude of effect is almost identical to the one estimated using a differences-in-differences approach in column 4 of Table 1. Second, we find that synthetic series mimics well hearing aid trade in the pre-treatment period. The p-values suggest that the effect becomes statistically significant at the 0.12 level towards the end of the period of observation.16 Figure 6: Effects of 3D printing on trade in hearing aids (Synthetic Control Method) Panel A: Effect Panel B: Statistical Significance 15 In 2016, the difference between the logarithm of hearing aid trade and the synthetic control is 0.448. This implies that observed trade is 56.5 percent higher than the control: (exp(. 448) − 1)*100=56.5178. 16 The p-value is equal to 0.12 in 2016. 3D PRINTING AND TRADE 19 To investigate the impact of 3D printing on countries with different levels of comparative advantage, we split countries into different groups according to their average RCA for the 1995- 2000 period (see Appendix Table 9). Panels A and C of Figure 7 report the differences between hearing aid trade and the synthetic series. The results show that 3D printing had a stronger effect on exports of countries with a revealed comparative advantage. The differences in 2016 are almost equal to the coefficients estimated using the differences-in-differences approach. The synthetic control method suggests that 3D printing doubled the exports of countries with a comparative advantage and increased exports by 50 percent for the other countries, while the estimated impact with the differences-in-differences approach is 84 and 56 percent, respectively. Panels B and D suggest that the effect is significant only for countries with a pre-existing comparative advantage in hearing aids. Figure 7: Effects of 3D printing on RCA in hearing aids (Synthetic Control Method) RCA> 1 Countries Panel A: Effect Panel B: Statistical Significance RCA< 1 Countries Panel C: Effect Panel D: Statistical Significance 3D PRINTING AND TRADE 20 In Figure 8 we investigate the impact of 3D printing on advanced and developing countries. Results in Panels A and C show that 3D printing had a very large impact on developing countries’ trade – more than twice as much as the effect on developed countries – unlike the differences-in- differences estimates. Once we use the same sample, which excludes low income economies, the magnitudes across techniques are comparable as the impact for developing economies is driven by the middle-income economies (see Table 10). Estimates of p-value in Panels B and C suggest that results are highly significant for developing countries, while the effect for developed countries is not significantly different from the effect of the placebo treatments. Figure 8: Effects of 3D printing on trade for countries at different levels of development (Synthetic Control Method) Developing Countries Panel A: Effect Panel B: Statistical Significance Developed Countries Panel C: Effect Panel D: Statistical Significance 3D PRINTING AND TRADE 21 As in the previous section, we also evaluate the impact of 3D printing on imports. Figure 9 presents the results on differences between hearing-aid imports and the respective synthetic controls. The 3D printing technology is estimated to have increased imports by 77 percent in 2016 (Panel A). The increase in imports is mostly driven by an expansion in demand by countries with a relative disadvantage in hearing aids (Panel B). Both results are strongly statistically significant (Figure 10, Panels A and B). Consistently with the difference-in-difference approach, the new technology also appears to have benefited consumers in developing countries. Developed countries’ imports increased by 53 percent in 2015 and 71 percent in 2016, although this effect is not consistently statistically significant, while the increase in developing countries was 116 percent in 2015 and 93 percent in 2016 and always statistically significant (Figure 9 Panel C and Figure 10 Panel C). 3D PRINTING AND TRADE 22 Figure 9: Effects of 3D printing on imports (Synthetic Control Method) – log difference Panel A: Overall effects Panel B: RCA Panel C: Development 3D PRINTING AND TRADE 23 Figure 10: Effects of 3D printing on imports (Synthetic Control Method) – statistical significance Panel A: Overall effects Panel B: RCA Panel C: Development 3D PRINTING AND TRADE 24 5. Other 3D printable sectors This section expands the differences-in-differences analysis to 3D printable sectors. Arvis et al. (2017) identify 4-digit SITC sub-groups deemed to be 3D printable in the short-medium term or that are currently 3D printable based on reviews of industry reports, websites, news articles, and interviews with industry participants (see Table 6 for the full list). Analyzing the trade impact of the new technology on these sectors allows to investigate the extent to which the results of previous sections are general and not specific to hearing aids. But there are two main limitations to using this list. First, 4-digit SITC sub-groups include a large number of products with different characteristics. For instance, within sub-group SITC 6659, “articles made of glass, n.e.s.”, there are 144 products ranging from laboratory glassware to coral imitation of glass. As a result, within each sub-group there can be products that are 3D printable and products that are not. Second, there is no clear distinction between printed and printable, or any indicator on the diffusion within each sub-group. This complicates the identification of the impact of 3D printing on trade as we assume that each sector is affected by the technology in the same way and also in the same year. As a first exercise, Table 4 presents the results on the impact of the diffusion of 3D printing on 3D printable sectors. As in the previous section, we assume that the technology became available in 2007. Column 1 confirms the positive impact of the technology on trade that was established in the previous sections. However, we find that the coefficient is sizably smaller than the ones reported in Table 1. The difference could be due to the fact that 3D printing has not yet been adopted by most of the printable industries. In other words, we are including in the treatment group units that should be used as controls which in turn biases the effects downwards. Differently from the hearing aids example, we find that the technology decreased trade for countries that used to have a comparative advantage in 3D printable products. Similarly to the previous analysis, we find a positive impact of the new technology on exports of advance and emerging economies. Taken together, these results are suggestive of 3D printing leading to a reshuffling in comparative advantage from labor abundant / developing economies to capital abundant / advanced economies.17 But the impact on trade growth suggests that concentration forces may be still relevant for this broader set of products. Finally, this evidence should not be interpreted as conclusive given the quality of the data used in this exercise and the uncertainty around the timing and extent of the adoption of the technology. 17 For instance, Adidas makes most of its shoes in Asia but its 3D printed shoes, Futurecraft 4D, come from a plant in the Bavarian town of Ansbach, Germany, or Carbon’s Silicon Valley office. https://www.forbes.com/sites/andriacheng/2018/05/22/with-adidas-3d-printing-may-finally-see-its-mass- retail-potential/#562ca1454a60 3D PRINTING AND TRADE 25 Table 5: 3D printable products pooled (1) (2) (3) (4) (5) VARIABLES log(exports) log(exports) log(exports) log(exports) log(exports) (3D printable 2007-) 0.059*** 0.119*** 0.095*** (0.019) (0.021) (0.023) (3D printable 2007-)*(Dummy RCA 1995-2000 > 1) -0.390*** (0.046) (3D printable 2007-)*(Dummy Developing) -0.051 (0.034) (3D printable 2007-)*(Dummy Low RCA 1995-2000 < 1) 0.236*** (0.039) (3D printable 2007-)*(Dummy High RCA 1995-2000 < 1) 0.051** (0.023) (3D printable 2007-)*(Dummy Low RCA 1995-2000 > 1) -0.194*** (0.053) (3D printable 2007-)*(Dummy High RCA 1995-2000 > 1) -0.416*** (0.067) (3D printable 2007-)*(Dummy Low income) -0.081 (0.062) (3D printable 2007-)*(Dummy Lower middle income) 0.018 (0.040) (3D printable 2007-)*(Dummy Upper middle income) 0.143*** (0.038) (3D printable 2007-)*(Dummy High income) 0.095*** (0.023) Observations 1,945,693 1,945,693 1,945,693 1,945,693 1,945,693 R-squared 0.869 0.869 0.869 0.869 0.869 Sum of coefficients .059*** -.271*** -.323*** .044* .175** Period 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES YES Country-Product FE YES YES YES YES YES % Zeroes .27 .27 .27 .27 .27 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1 3D PRINTING AND TRADE 26 As a second exercise, we exploit product level characteristics to identify heterogenous effects of 3D printing on trade. This allows to study the extent to which the impact of 3D printing on trade in the previous sections depends on the product characteristics of hearing aids. Specifically, we investigate if product weight plays a role in the decision of localizing production closer to consumers versus concentrating the production in one location. Intuitively, for products like hearing aids that are light and hence have lower transport costs, incentives to localize production closer to consumer should be lower than for heavier products. Ideally, we would also like to identify how the impact of 3D printing on trade varies based on the interplay between economies of scale intensity and product weight. Unfortunately, data on scale elasticities is available only for a limited number of 2-digit sectors (see Bartelme, Costinot, Donaldson and Rodriguez-Clare, 2018). To formally test for differential impacts of 3D printing on trade in heavy and light goods, we augment equation (1) by an interaction term between (3 2007) and product ’s log of weight. The weight of product is defined as the median unit weight of HS 6-digit products corresponding to a 4-digit SITC product.18 The unit weight measure for printable sectors varies from 52 grams for spectacles (SITC 8842) to 98 kilograms for machine tools for deburring (SITC 7316). Before describing the results from this specification, it is important to stress some caveats. First there may be an aggregation bias, if some products in a category are light and others are heavy. In addition, the effects could be misidentified if weight is a determinant of technology adoption. Moreover, it is possible that the technology could affect product weight as it may allow to design new structures that are lighter and use less material. With these caveats in mind, Figure 11 presents the results on the impact of 3D printing on exports and imports as a function of product weight. Panel A shows that the impact of 3D printing on exports decreases with product weight. Exports of lighter products such as spectacles increased the most after the technology became available while the impact becomes insignificant for heavier product such as aircraft and spacecraft parts. Results in Panel B suggest that the availability of 3D printing led to a statistically significant decrease in import of heavy printable products, mainly machineries. The results suggest that 3D printing is more likely to lead to fragmented production for products that are light and, hence, cheaper to trade. On the other hand, there is some evidence that the technology could be used to produce goods closer to consumers for products subject to high transport costs. 18 We calculate unit weights with HS 6-digit data, instead of SITC 4-digit, as the information is provided on a more detailed degree of disaggregation. 3D PRINTING AND TRADE 27 Figure 11: Effects of 3D printing on trade conditional on weight Panel A: Effect on exports Panel B: Effect on imports 6. Conclusion 3D printing is a new technology that allows to produce customized products from a digital file. This paper takes a first look at the impact of this technology on international trade using a difference-in-difference technique and synthetic control methods. We focus on hearing aids, a product that since the mid-2000s has almost exclusively been produced employing the 3D printing technology. Contrary to what appears as conventional wisdom, we find that the new technology leads to an increase in world trade as it allows to reduce production costs. An analysis of 35 other products that are increasingly using 3D printing confirms this main insight, but also suggests that product characteristics such as bulkiness can affect the relationship between 3D printing and trade. As more information on the adoption of the new technology in different sectors becomes available, uncovering the sources of these differential trade effects of 3D printing could be a fruitful avenue for future research. 3D PRINTING AND TRADE 28 References [1] A. Abadie, A. Diamond, and J. Hainmueller, “Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program,” Journal of the American Statistical Association, vol. 105, no. 490, pp. 493–505, 2010. [2] ——, “Comparative politics and the synthetic control method,” American Journal of Political Science, vol. 59, no. 2, pp. 495–510, 2015. [3] A. Abadie and J. Gardeazabal, “The Economic Costs of Conflict: A Case Study of the Basque Country,” American Economic Review, vol. 93, no. 1, pp. 113–132, March 2003. [4] D. Acemoglu, S. Johnson, A. Kermani, J. Kwak, and T. Mitton, “The value of connections in turbulent times: Evidence from the united states,” Journal of Financial Economics, vol. 121, no. 2, pp. 368 – 391, 2016 [5] J.-F. Arvis, P. E. Kent, B. Shepherd, and R. Nair, “Additive manufacturing and the diffusion of 3d printing: Impact on international trade,” World Bank, 2017. [6] S. Banker, “3D Printing Revolutionizes the Hearing Aid Business,” Forbes, Oct 15, 2013. Available: https://www.forbes.com/sites/stevebanker/2013/10/15/3d-printing-revolutionizes-the- hearing-aid-business/#6bbd4ad15ef2 [7] D. Bartelme, A. Costinot, D. Donaldson, and A. Rodriguez-Clare, “Economies of Scale and Industrial Policy: A View from Trade,” mimeo, 2018. [8] A. Billmeier and T. Nannicini, “Assessing Economic Liberalization Episodes: A Synthetic Control Approach,” The Review of Economics and Statistics, vol. 95, no. 3, pp. 983–1001, July 2013. [9] K. Brans, “3d printing, a maturing technology,” IFAC Proceedings Volumes, vol. 46, no. 7, pp. 468–472, 2013. [10] F. G. Caselli, “Did the Exchange Rate Floor Prevent Deflation in the Czech Republic?” Review of Economics and Institutions, vol. 8, no. 2, p. 31, 2017. [11] E. Cavallo, S. Galiani, I. Noy, and J. Pantano, “Catastrophic Natural Disasters and Economic Growth,” The Review of Economics and Statistics, vol. 95, no. 5, pp. 1549–1561, December 2013. [12] R. d’Aveni, “The 3-d printing revolution,” Harvard Business Review, vol. 93, no. 5, pp. 40– 48, 2015. 3D PRINTING AND TRADE 29 [13] F. Eberth, “Increasing the relevance of trade statistics: trade by high -tech products,” Working Party on International Trade in Goods and Trade in Services Statistics STD/SES/WPTGS, vol. 10, 2008. [14] M. E. Fischer, K. J. Cruickshanks, T. L. Wiley, B. E. Klein, R. Klein, and T. S. Tweed, “Determinants of hearing aid acquisition in older adults,” American journal of public health, vol. 101, no. 8, pp. 1449–1455, 2011. [15] A. Goldfarb and C. Tucker, “Digital economics,” National Bureau of Economic Research, Working Paper 23684, August 2017. [16] K. Heilmann, “Does political conflict hurt trade? Evidence from consumer boycotts,” Journal of International Economics, vol. 99, no. C, pp. 179–191, 2016. [17] R. Leering, “3d printing: a threat to global trade,” ING, September, 2017. [18] F. R. Lin, J. K. Niparko, and L. Ferrucci, “Hearing loss prevalence in the united states,” Archives of internal medicine, vol. 171, no. 20, pp. 1851–1853, 2011. [19] C. G. Sandström, “The non-disruptive emergence of an ecosystem for 3d printing–insights from the hearing aid industry’s transition 1989–2008,” Technological Forecasting and Social Change, vol. 102, pp. 160–168, 2016. [20] R. Sharma, “The 3d printing revolution you have not heard about,” Forbes, vol. 8, p. 2013, 2013. [21] “A printed smile,” The Economist, Apr 2016. [Online]. Available: https://- www.economist.com/science-and-technology/2016/04/28/a-printed-smile [22] ““Big-6″ to Become “Big-5″ as R&D Costs Drive Consolidation,” The Hearing Review, Oct. 2006. [Online]. Available: http://www.hearingreview.com/2006/10/big-6-to-become-big-5-as- rd-costs-drive-consolidation/ [23] R. Van den Brink, H. Wit, G. Kempen, and M. Van Heuvelen, “Attitude and help-seeking for hearing impairment,” British journal of audiology, vol. 30, no. 5, pp. 313–324, 1996. 3D PRINTING AND TRADE 30 APPENDIX Table 6: List of High-Tech products (OECD – Eberth, 2008) HS code Product name 280450 Boron; tellurium 280461 Silicon containing by weight not less than 99.99% of silicon 280469 Silicon nes 280470 Phosphorus 280480 Arsenic 280490 Selenium 280521 Calcium 280522 Strontium and barium 280530 Rare-earth metals, scandium and yttrium 282520 Lithium oxide and hydroxide 282530 Vanadium oxides and hydroxides 282540 Nickel oxides and hydroxides 282550 Copper oxides and hydroxides 282560 Germanium oxides and zirconium dioxide 282570 Molybdenum oxides and hydroxides 282580 Antimony oxides 284410 Natural uranium & its compounds; mixtures cntg natural uranium/its co 284420 Uranium U235+ & its compds, plutonium & its compds, their mx & compds 284430 Uranium U235- & its compds, thorium & its compds, their mx & compds t 284440 Radio active elements & isotopes nes, their mixtures & compounds ther 284450 Spent fuel elements of nuclear reactors 284510 Heavy water (deuterium oxide) 284590 Isotopes nes and their compounds 284610 Cerium compounds 284690 Compds of rare-earth met nes, of yttrium/scandium/mx of these metals 293710 Pituitary anterior hormones and their derivatives, in bulk 293721 Cortisone, hydrocortisone, prednisone and prednisolone, in bulk 293722 Halogenated derivatives of adrenal cortical hormones, in bulk 293729 Adrenal cortical hormon nes, in blk; deriv of adren cor horm, nes, in 293791 Insulin and its salts, in bulk 293792 oestrogens and progestogens, in bulk 293799 Hormones nes & thr derivs, in bulk; steroids nes usd prim as horm, in 293810 Rutoside (rutin) and its derivatives, in bulk 293890 Glycosides & their salts, ethers, esters & other derivatives, nes, in 294110 Penicillins and their derivatives, in bulk; salts thereof 294120 Streptomycins and their derivatives, in bulk; salts thereof 294130 Tetracyclines and their derivatives, in bulk; salts thereof 294140 Chloramphenicol and its derivatives, in bulk; salts thereof 294150 Erythromycin and its derivatives, in bulk; salts thereof 3D PRINTING AND TRADE 31 HS code Product name 294190 Antibiotics nes, in bulk 300110 Glands and other organs, dried, powdered or not, for therapeutic uses 300120 Extracts of glands/oth organs/of their secretions, for therapeutic us 300190 Heparin & its salts; human/animal substances f therap/prophltc uses, 300210 Antisera and other blood fractions 300220 Vaccines, human use 300290 Human blood; animl blood f therap, prophltc/diag uses; microbial prep 300310 Penicillins or streptomycins and their derivatives, formulated, in bu 300320 Antibiotics nes, formulated, in bulk 300331 Insulin, formulated, in bulk 300339 Hormones nes, formulatd, not cntg antibiotics, in bulk, o/t contracep 300410 Penicillins or streptomycins and their derivatives, in dosage 300420 Antibiotics nes, in dosage 300431 Insulin, in dosage 300432 Adrenal cortex hormones, in dosage 300439 Hormones nes, not containing antibiotics, in dosage, o/t contraceptiv 320411 Disperse dyes and preparations based thereon 320412 Acid and mordant dyes and preparations based thereon 320413 Basic dyes and preparations based thereon 320414 Direct dyes and preparations based thereon 320415 Vat dyes and preparations based thereon 320416 Reactive dyes and preparations based thereon 320417 Synthetic organic pigments and preparations based thereon 320419 Synthetic organic colourg matter nes, prep of syn orgn colourg matter 320420 Synthetic organic products used as fluorescent brightening agents 320490 Synthetic organic products used as luminophores 320500 Color lakes and preparations based thereon 380810 Insecticides, packaged for retail sale or formulated 380820 Fungicides, packaged for retail sale or formulated 380830 Herbicides, anti-sproutg prod & plant growth regs, packd f retail/for 380840 Disinfectants, packaged for retail sale or formulated 380890 Pesticides includg rodenticides, nes, packagd for retail sale/formula 390760 Polyethylene terephthalate 840110 Nuclear reactors 840120 Machinery and apparatus for isotopic separation and parts thereof 840130 Fuel elements (cartridges), non-irradiated, for nuclear reactors 840140 Parts of nuclear reactors 841111 Turbo-jets of a thrust not exceeding 25 KN 841112 Turbo-jets of a thrust exceeding 25 KN 841121 Turbo-propellers of a power not exceeding 1100 KW 841122 Turbo-propellers of a power exceeding 1100 KW 841181 Gas turbines nes of a power not exceeding 5000 KW 841182 Gas turbines nes of a power exceeding 5000 KW 3D PRINTING AND TRADE 32 HS code Product name 841191 Parts of turbo-jets or turbo-propellers 841199 Parts of gas turbines nes 841210 Reaction engines nes other than turbo jets 845610 Mach-tls f work any mat by rem of mat optd by laser/lt/photo beam pro 845620 Mach-tls for work any mat by rem of mat optd by ultrasonic processes 845630 Mach-tls f work any mat by rem of mat optd by electro-discharg proces 845710 Machining centres, for working metal 845811 Horizontal lathes numerically controlled for removing metal 845891 Lathes nes numerically controlled for removing metal 845921 Drilling mches nes; numerically controlled for removing metal 845931 Boring-milling mches nes, numerically controlled for removing metal 845951 Milling mach, knee-type numerically controlled for removing metal 845961 Milling machines nes, numerically controlled for removing metal 846011 Fl-surf grindg mach in which pos of 1 axis acc to 0.01 mm n/c rem met 846021 Grindg mach in which pos of 1 axis to an acc to 0.01mm n/c f rem met 846031 Sharpening (tool or cutter grinding) mach n/c for removing metal 846040 Honing or lapping machines for removing metal 846221 Bendg foldg stgtg or flatteng mach (inc presses) n/c for workg met 846231 Shearg mach (inc presse) o/t combind punchg/shearg mach n/c f wrkg me 846241 Punchg/notchg mach (inc presse)inc comb pnch/shear mach n/c f wrkg me 846693 Parts & accessories nes for use on machines of headg No 84.56 to 84.6 846694 Parts & accessories nes for use on machines of headg No 84.62 or 84.6 847110 Analogue or hybrid automatic data processing machines 847330 Parts & accessories of automatic data processg machines & units there 851521 Electric mach/app for resistance welding of metal fully or partly aut 851531 Elec mach & app for arc (inc plasma arc) weldg of met fully/partly au 851730 Telephonic or telegraphic switching apparatus 851790 Parts of electrical apparatus for line telephone or line telegraphy 851810 Microphones and stands therefor 851821 Single loudspeakers, mounted in the same enclosure 851822 Multiple loudspeakers, mounted in the same enclosure 851829 Loudspeakers, nes 851830 Headphones, earphones and combined microphone/speaker sets 851840 Audio-frequency electric amplifiers 851850 Electric sound amplifier sets 851890 Parts of microphones, loudspeakrs, headphones, earphones & elec sound 851999 Sound reproducing apparatus, not incorporating a sound recorder, nes 852110 Video recording or reproducing apparatus magnetic tape-type 852190 Video recording or reproducing apparatus nes 852510 Transmission apparatus for radio-teleph radio-broadcastg or televisio 852520 Transmission apparatus, for radioteleph incorporatg reception apparat 852530 Television cameras 852610 Radar aparatus 3D PRINTING AND TRADE 33 HS code Product name 852691 Radio navigational aid apparatus 852692 Radio remote control apparatus 852790 Radio reception apparatus nes 853110 Burglar or fire alarms and similar apparatus 853120 Indicator panels incorporatg liquid crystal device/light emittg diode 853180 Electric sound or visual signalling apparatus, nes 853221 Electrical capacitors, fixed, tantalum, nes 853222 Electrical capacitors, fixed, aluminium electrolytic, nes 853223 Electrical capacitors, fixed, ceramic dielectric, single layer, nes 853224 Electrical capacitors, fixed, ceramic dielectric, multilayer, nes 853400 Printed circuits 853710 Boards, panels, includg numerical control panels, for a voltage 2, 000 kg but not exceedg 15, 000 880240 Aircraft nes of an unladen weight exceeding 15, 000 kg 880310 Aircraft propellers and rotors and parts thereof 880320 Aircraft under-carriages and parts thereof 900110 optical fibs, optical fib bundles & cables, oth than those of headg 8 900120 Sheets and plates of polarizing material 900130 Contact lenses 900190 Prisms, mirrors & other optical elements of any material, unmounted, 900510 Binoculars 900580 Monoculars, other optical telescopes, astronomical inst & mountings, 900610 Cameras of a kind used for preparing printing plates or cylinders 3D PRINTING AND TRADE 34 HS code Product name 900620 Cameras of a kind used for recordg doc on microfilm or oth microforms 900630 Cameras designed for special use, underwater, aerial survey, etc 900640 Instant print cameras 900711 Cinema cameras f film of less than 16 mm width/for double-8 mm film 900719 Cinematographic cameras, nes 900911 Electrostatic photo-copying apparatus, direct process type 900912 Electrostatic photo-copying apparatus, indirect process type 900921 Photo-copying apparatus, incorporating an optical system, nes 900922 Contact type photo-copying apparatus, nes 901110 Stereoscopic microscopes 901120 Microscopes, for microphotography, microcinematography o microproject 901180 Microscopes, optical, nes 901190 Parts and accessories for optical microscopes 901210 Microscopes other than optical microscopes and diffraction apparatus 901290 Parts and accessories for microscopes other than optical microscopes 901320 Lasers, other than laser diodes 901380 optical devices, appliances and instruments, nes, of this Chapter 901410 Direction finding compasses 901420 Instruments & appl f aeronautical/space navigation (oth thn compasses 901480 Navigational instruments and appliances nes 901490 Parts & access for direction findg compasses & other navigational ins 901510 Rangefinders 901520 Theodolites and tacheometers 901530 Surveying levels 901540 Photogrammetrical surveying instruments and appliances 901580 Surveyg, hydrographic, oceanographic, meteorologic/geophysical inst n 901590 Parts and accessories for use with the apparatus of heading No 90.15 901600 Balances of a sensitivity of 5 cg or better with or without weights 901841 Dental drill engines, whether o not combi on a single base w oth equi 902111 Artificial joints 902119 Orthopaedic or fracture appliances, nes 902130 Artificial parts of the body, nes 902140 Hearing aids, excluding parts and accessories 902150 Pacemakers for stimulating heart muscles, excluding parts & accessori 902230 X-ray tubes 902300 Instruments, apparatus and models, designed for demonstrational purpo 902410 Machines & appliances for testing the mechanical properties of metals 902480 Machines & appliances f testg the mechanical properties of oth materi 902490 Parts & accessories of mach & appl for testg mech properties of mater 902511 Thermometers, not combined with other instruments, liquid-filled 902519 Thermometers, not combined with other instruments, nes 902580 Hydrometers, pyrometers, hygrometers & psychrometers, recordg or not, 902590 Parts and accessories for use with the apparatus of heading No 90.25 3D PRINTING AND TRADE 35 HS code Product name 902610 Instruments & apparatus for measurg o checkg the flow o level of liqu 902620 Instruments and apparatus for measuring or checking pressure 902680 Instruments & apparatus for measurg o check variables of liq o gases, 902690 Parts of inst & app for measurg or checkg variables of liq or gases, 902710 Gas or smoke analysis apparatus 902720 Chromatographs and electrophoresis instruments 902730 Spectrometers, spectrophotometers & spectrographs usg optical radiati 902740 Exposure meters 902750 Instruments and apparatus using optical radiations (UV, visible, IR), 902780 Instruments and apparatus for physical or chemical analysis, nes 902790 Microtomes; parts & access of inst & app for physical or chem analysi 903010 Instruments & apparatus for measuring or detecting ionising radiation 903020 Cathode-ray oscilloscopes and cathoderay oscillographs 903031 Multimeters 903039 Inst & app, for measurg or checkg voltage, current, etc w/o a record 903040 Instruments & apparatus, specially designed for telecommunications ne 903089 Instruments & apparatus for measurg or checkg electrical quantities n 903090 Parts & access for inst & app for meas or checkg electrical quantitie 903210 Thermostats 903220 Manostats 903281 Hydraulic or pneumatic automatic regulating or controlling inst & app 903289 Automatic regulating or controlling instruments and apparatus, nes 903290 Parts & access for automatic regulatg or controllg instruments & app, 903300 Parts & access nes for machines, appliances, inst or app of Chapter 9 930100 Military weapons, other than revolvers, pistols & arms of headg No 93 930200 Revolvers and pistols, other than those of heading No 93.03 or 93.04 930310 Muzzle-loading firearms 930320 Shotguns incl combination shotgun-rifles sporting, huntg/target-shoot 930330 Rifles, sporting, hunting or targetshooting, nes 930390 Firearms & sim devices operatd by the firg of an explosive charge nes 930400 Arms nes, excluding those of heading No 93.07 930510 Parts & accessories of revolvers or pistols of headg Nos 93.01 to 93. 930521 Shotgun barrels of heading No 93.03 930529 Parts and accessories of shotguns or rifles, nes of heading No 93.03 930590 Parts and accessories nes of heading Nos 93.01 to 93.04 930610 Cartridges f rivetg/sim tools/for captive-bolt humane killers incl pt 930621 Cartridges, shotgun 930629 Air gun pellets and parts of shotgun cartridges 930630 Cartridges nes and parts thereof 930690 Munitions of war & pts thereof & other ammunitions & projectiles & pt 930700 Swords, cutlasses, bayonets, lances & sim arms & parts, scabbards & s 3D PRINTING AND TRADE 36 Table 7: Major products that are currently 3D printed or likely to be 3D printable SITC-4 SITC Revision 3/4 Product Description 5817 Fittings for tubes, pipes & hoses (e.g., joints, elbows, flanges), of plastics Refractory ceramic goods (e.g., retorts, crucibles, muffles, nozzles, plugs, supports, cupels, tubes, pipes, 6637 sheaths & rods), n.e.s. 6639 Articles of ceramic materials, n.e.s. 6652 Glassware of a kind used for table, kitchen, toilet, office, indoor decoration or similar purposes 6659 Articles made of glass, n.e.s. 6768 Angles, shapes and sections (excluding rails) and sheet piling, of iron or steel 6827 Copper tubes, pipes and tube or pipe fittings (e.g., couplings, elbows, sleeves) Hand tools, the following: spades, shovels, mattocks, picks, hoes, forks & rakes; axes, billhooks & similar hewing tools; secateurs & pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges & 6951 other tools Spanners & wrenches, hand-operated (including torque meter wrenches but not including tap wrenches); 6953 interchangeable spanner sockets, with/without handles. Knives and cutting blades, for machines or for mechanical appliances; interchangeable tools for hand tools 6956 or for machine tools; plates, sticks, tips and the like for tools 7119 Parts for the boilers and auxiliary plant of subgroups 711.1 and 711.2 7128 Parts for the turbines of subgroup 712.1 7249 Parts for the machines of subgroups 724.7 and 775.1 7259 Parts of the machines of group 725 7272 Other food-processing machinery and parts thereof, n.e.s. Machine tools for deburring, sharpening, grinding, honing, lapping, polishing or otherwise finishing metal, sintered metal carbides or cermets by means of grinding stones, abrasives or polishing products (other 7316 than gear-cutting, gear-grinding 7438 Parts for the pumps, compressors, fans & hoods of subgroups 743.1 & 743.4 Machinery parts, not containing electrical connectors, insulators, coils, contacts or other electrical features, 7499 n.e.s. 8721 Dental instruments and appliances, n.e.s. 8842 Spectacles and spectacle frames 8939 Articles of plastics, n.e.s. 8991 Articles and manufactures of carving or moulding materials, n.e.s. 8992 Artificial flowers, foliage and fruit and parts thereof; articles made of artificial flowers, foliage or fruit 8993 Candles; matches, pyrophoric alloys, articles of combustible materials; smokers requisites 7491 Moulding Boxes 7149 Parts of the engines and motors (SITC-4: 8721 Dental instruments and appliances, n.e.s. 5413 Antibiotics and Medicines 5421 Antibiotics and Medicines 5429 Antibiotics and Medicines 7929 Aircraft and Spacecraft Parts 8512 Footwear and Insoles 8513 Footwear and Insoles 8519 Footwear and Insoles 8996 Orthopedic Devices (hearing aids) 3D PRINTING AND TRADE 37 Table 8: WB income classification World Bank Income World Bank Income Country Name Group Country Name Group Afghanistan Low income Australia High income Benin Low income Austria High income Burkina Faso Low income Belgium High income Burundi Low income Canada High income Chad Low income Chile High income Ethiopia Low income Czech Republic High income Guinea Low income Denmark High income Haiti Low income Finland High income Korea, Dem. People's Rep. Low income France High income Madagascar Low income Germany High income Malawi Low income Greece High income Mali Low income Hong Kong SAR, China High income Mozambique Low income Hungary High income Nepal Low income Israel High income Niger Low income Italy High income Rwanda Low income Japan High income Senegal Low income Korea, Rep. High income Sierra Leone Low income Netherlands High income Somalia Low income Norway High income South Sudan Low income Poland High income Tanzania Low income Portugal High income Togo Low income Saudi Arabia High income Uganda Low income Singapore High income Zimbabwe Low income Slovak Republic High income Angola Lower middle income Spain High income Bangladesh Lower middle income Sweden High income Bolivia Lower middle income Switzerland High income Cambodia Lower middle income United Arab Emirates High income Cameroon Lower middle income United Kingdom High income Congo, Rep. Lower middle income United States High income Côte d'Ivoire Lower middle income Egypt, Arab Rep. Lower middle income El Salvador Lower middle income Ghana Lower middle income Guatemala Lower middle income Honduras Lower middle income India Lower middle income Indonesia Lower middle income Jordan Lower middle income Kenya Lower middle income Kyrgyz Republic Lower middle income Lao PDR Lower middle income Morocco Lower middle income Myanmar Lower middle income Nicaragua Lower middle income Nigeria Lower middle income Pakistan Lower middle income Papua New Guinea Lower middle income Philippines Lower middle income 3D PRINTING AND TRADE 38 World Bank Income World Bank Income Country Name Group Country Name Group Sri Lanka Lower middle income Sudan Lower middle income Syrian Arab Republic Lower middle income Tajikistan Lower middle income Tunisia Lower middle income Ukraine Lower middle income Uzbekistan Lower middle income Vietnam Lower middle income Yemen, Rep. Lower middle income Zambia Lower middle income Algeria Upper middle income Argentina Upper middle income Azerbaijan Upper middle income Belarus Upper middle income Brazil Upper middle income Bulgaria Upper middle income China Upper middle income Colombia Upper middle income Cuba Upper middle income Dominican Republic Upper middle income Ecuador Upper middle income Iran, Islamic Rep. Upper middle income Iraq Upper middle income Kazakhstan Upper middle income Lebanon Upper middle income Libya Upper middle income Malaysia Upper middle income Mexico Upper middle income Paraguay Upper middle income Peru Upper middle income Romania Upper middle income Russian Federation Upper middle income Serbia Upper middle income South Africa Upper middle income Thailand Upper middle income Turkey Upper middle income Turkmenistan Upper middle income Venezuela, RB Upper middle income 3D PRINTING AND TRADE 39 Table 9: Continuous Exporters of Hearing Aids SCM Sample Developing RCA>1 Australia 0 1 Austria 0 1 Brazil 1 0 Canada 0 0 China 1 0 Czech Republic 0 0 Denmark 0 1 Finland 0 0 France 0 0 Germany 0 0 Greece 0 0 Hong Kong SAR, China 0 0 Hungary 0 0 India 1 0 Israel 0 0 Italy 0 0 Japan 0 0 Korea, Rep. 0 0 Malaysia 1 0 Mexico 1 0 Netherlands 0 0 Norway 0 0 Portugal 0 0 Russian Federation 1 0 Saudi Arabia 0 0 Singapore 0 1 South Africa 1 0 Spain 0 0 Sweden 0 0 Switzerland 0 1 United Arab Emirates 0 0 United Kingdom 0 0 United States 0 0 3D PRINTING AND TRADE 40 Table 10: Difference-in-difference with Synthetic Control Methods Sample (33 Countries) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) Sector control same_2dg same_2dg same_2dg same_2dg same_2dg hightech hightech hightech hightech hightech hightech_2dg hightech_2dg hightech_2dg hightech_2dg hightech_2dg VARIABLES log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) log(exports) (Hearing Aid 2007-) 0.782*** 0.786*** 0.532*** 0.764*** 0.765*** 0.497*** 0.676*** 0.688*** 0.446** (0.176) (0.205) (0.185) (0.174) (0.203) (0.179) (0.171) (0.198) (0.186) (Hearing Aid 2007- )*(Dummy RCA 1995- 2000 > 1) -0.028 -0.007 -0.078 (0.260) (0.259) (0.283) (Hearing Aid 2007- )*(Dummy Developing) 1.177*** 1.258*** 1.085*** (0.305) (0.292) (0.277) (Hearing Aid 2007- )*(Dummy Low RCA 1995-2000 < 1) 2.151*** 2.069*** 1.906*** (0.115) (0.088) (0.121) (Hearing Aid 2007- )*(Dummy High RCA 1995-2000 < 1) 0.735*** 0.717*** 0.643*** (0.207) (0.205) (0.200) (Hearing Aid 2007- )*(Dummy Low RCA 1995-2000 > 1) 0.964*** 0.952*** 0.851*** (0.149) (0.161) (0.190) (Hearing Aid 2007- )*(Dummy High RCA 1995-2000 > 1) 0.448*** 0.467*** 0.248 (0.167) (0.180) (0.262) (Hearing Aid 2007- )*(Dummy Low income) - - - (Hearing Aid 2007- )*(Dummy Lower middle income) 0.837*** 0.758*** 0.741*** (0.102) (0.081) (0.125) (Hearing Aid 2007- )*(Dummy Upper middle income) 1.854*** 1.921*** 1.662*** (0.235) (0.200) (0.192) (Hearing Aid 2007- )*(Dummy High income) 0.532*** 0.497*** 0.446** (0.185) (0.179) (0.186) Observations 105,989 105,989 105,989 105,989 105,989 170,446 170,446 170,446 170,446 170,446 52,089 52,089 52,089 52,089 52,089 R-squared 0.861 0.861 0.861 0.861 0.861 0.852 0.852 0.852 0.852 0.852 0.867 0.867 0.867 0.867 0.867 Sum coefficients .782*** .757*** 4.298*** 1.709*** 3.223*** .764*** .758*** 4.205*** 1.755*** 3.176*** .676*** .609*** 3.647*** 1.531*** 2.849*** Period 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES YES YES YES YES YES YES YES YES YES YES YES Country-Product FE YES YES YES YES YES YES YES YES YES YES YES YES YES YES YES % Zeroes .4 .4 .4 .4 .4 .44 .44 .44 .44 .44 .37 .37 .37 .37 .37 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1 3D PRINTING AND TRADE 41 Table 11: 3D printable products – Imports (1) (2) (3) (4) (5) VARIABLES log(imports) log(imports) log(imports) log(imports) log(imports) (3D printable 2007-) 0.033*** 0.020 0.051*** (0.012) (0.013) (0.015) (3D printable 2007-)*(Dummy RCA 1995-2000 > 1) 0.081*** (0.027) (3D printable 2007-)*(Dummy Developing) -0.027 (0.022) (3D printable 2007-)*(Dummy RCA 1995-2000 << 1) 0.013 (0.024) (3D printable 2007-)*(Dummy RCA 1995-2000 < 1) 0.025 (0.015) (3D printable 2007-)*(Dummy RCA 1995-2000 > 1) 0.115*** (0.026) (3D printable 2007-)*(Dummy RCA 1995-2000 >> 1) 0.074 (0.048) (3D printable 2007-)*(Dummy Low income) -0.031 (0.039) (3D printable 2007-)*(Dummy Lower middle income) 0.029 (0.024) (3D printable 2007-)*(Dummy Upper middle income) 0.055** (0.024) (3D printable 2007-)*(Dummy High income) 0.051*** (0.015) Observations 1,965,467 1,965,467 1,965,467 1,965,467 1,965,467 R-squared 0.908 0.908 0.908 0.908 0.908 Sum coefficients .033*** .101*** .227*** .024 .104* Period 1995-2016 1995-2016 1995-2016 1995-2016 1995-2016 Country-Year FE YES YES YES YES YES Country-Product FE YES YES YES YES YES SITC 2dg-Year FE NO NO NO NO NO % Zeroes .26 .26 .26 .26 .26 Note: Robust standard errors, clustered at the country-product level, are in parentheses. Countries with population over 5mln. *** p<0.01, ** p<0.05, * p<0.1