3D printing, international trade, and FDI

We analyze the relationship between 3D printing technology, the volume of trade, and the structure of foreign direct investment (FDI). We present a standard trade model with firm-specific heterogeneity into which we include 3D printing as a technology choice for foreign direct investment. The model generates three predictions. First, 3D printers are introduced in areas with high economic activity that face high transport costs. Second, technological progress in 3D printing leads to FDI dependent on traditional techniques gradually being replaced by FDI based on 3D printing. Third, with wider adoption, further technological progress in 3D printing leads to a gradual replacement of international trade. Empirical evidence focusing on the sectors with the highest rates of adoption supports the first hypothesis, while evidence from a case study supports the second and third. Our results suggest that the traditional strategy of poor countries for export-led industrialization is threatened by the widespread adoption of 3D printing that replaces international trade.