Trapped factors and China?s impact on global growth
Nicholas Bloom, Paul Romer, Stephen Terry and John Van Reenen
After a recent increase in Chinese import competition, European firms increased innovation. We present and rationalise these patterns using `trapped factors? at the micro level within a stylised equilibrium model of product-cycle trade and growth. Trade integration of the magnitude observed between the OECD and low-wage nations as a whole can considerably increase the long-run growth rate and welfare. In the short run exposed firms devote trapped factors to increased innovation, leading both to increased innovation at these individual firms as well as to a small amount of extra transitional growth overall. China accounts for half of the dynamic trade gains.
1 January 2021
The Economic Journal 131(633) , pp.156-191, 2021
https://academic.oup.com/ej/article/131/633/156/5867760
This Journal article is published under the centre's Growth programme.