Bloom, Nicholas, Romer, Paul M., Terry, Stephen J. and Van Reenen, John ORCID: 0000-0001-9153-2907
(2013)
A trapped-factors model of innovation.
American Economic Review, 103 (3).
pp. 208-213.
ISSN 0002-8282
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Abstract
We explain a counterintuitive empirical finding: Firms facing more import competition do more innovation. In our model, factors are trapped inside a firm. An increase in import competition encourages a firm to innovate by reducing the opportunity cost of inputs. Without trapped factors, trade liberalization leads to a small permanent increase in the worldwide rate of growth. With trapped factors, firms that face more import competition do relatively more innovation. The extra innovation induced by trapped factors induces a small permanent increase in aggregate output, consumption, and welfare, generalizing the appropriate estimate of the gains from trade.
Item Type: | Article |
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Official URL: | https://www.aeaweb.org/aer/papers.php |
Additional Information: | © 2013 American Economic Association |
Divisions: | Economics Centre for Economic Performance |
Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor |
JEL classification: | D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives |
Date Deposited: | 02 Sep 2014 09:16 |
Last Modified: | 13 Aug 2024 23:14 |
URI: | http://eprints.lse.ac.uk/id/eprint/59326 |
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