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Trapped factors and China’s impact on global growth

Van Reenen, John, Bloom, Nick, Romer, Paul and Terry, Stephen (2020) Trapped factors and China’s impact on global growth. Economic Journal. ISSN 0013-0133 (In Press)

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Abstract

In response to a recent increase in Chinese import competition, European firms increased their innovation. We present and then rationalize these cross-sectional patterns using “trapped factors” at the micro level within a stylized 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 in- creased innovation at these firms in the cross section as well as to a small amount of extra transitional growth overall. China alone accounts for half of the dynamic trade gains.

Item Type: Article
Official URL: https://academic.oup.com/ej
Additional Information: © 2020 Royal Economic Society
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HG Finance
H Social Sciences > HF Commerce
Date Deposited: 05 Jun 2020 14:09
Last Modified: 27 Jun 2020 23:27
URI: http://eprints.lse.ac.uk/id/eprint/105013

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