Cookies?
Library Header Image
LSE Research Online LSE Library Services

A trapped-factors model of innovation

Bloom, Nicholas, Romer, Paul M., Terry, Stephen J. and Van Reenen, John (2013) A trapped-factors model of innovation. American Economic Review, 103 (3). pp. 208-213. ISSN 0002-8282

[img]
Preview
PDF - Published Version
Download (827kB) | Preview
Identification Number: 10.1257/aer.103.3.208

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
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
Sets: Departments > Economics
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 02 Sep 2014 09:16
Last Modified: 20 Feb 2019 10:42
URI: http://eprints.lse.ac.uk/id/eprint/59326

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics