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Journal article

Trapped Factors and China’s Impact on Global Growth


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.


Nicholas Bloom, Paul Romer, Stephen Terry and John Van Reenen

1 January 2021


The Economic Journal 131(633) , pp.156-191, 2021


DOI: 10.1093/ej/ueaa086

https://academic.oup.com/ej/article/131/633/156/5867760

This work is published under POID and the CEP's Growth programme.