This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 103 No. 3 (May 2013)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

A Trapped-Factors Model of Innovation

Article Citation

Bloom, Nicholas, Paul M. Romer, Stephen J. Terry, and John Van Reenen. 2013. "A Trapped-Factors Model of Innovation." American Economic Review, 103(3): 208-13.

DOI: 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.

Article Full-Text Access

Full-text Article

Additional Materials

Authors

Bloom, Nicholas (Stanford U)
Romer, Paul M. (NYU)
Terry, Stephen J. (Stanford U)
Van Reenen, John (CEP, London School of Economics and Political Science)

JEL Classifications

D21: Firm Behavior: Theory
F14: Empirical Studies of Trade
L21: Business Objectives of the Firm
O31: Innovation and Invention: Processes and Incentives


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us