-run growth by increasing the profit from innovation. In the short run, factors of production must be reallocated inside firms …, which lowers the opportunity cost of innovation, generating an additional trapped factor effect. Starting from a baseline … OECD growth rate of 2% we find that trade integration with low-wage countries in the decade around China's WTO accession …

Increasingly, a small number of low-wage countries such as China and India are involved in innovation -- not `big ideas …' innovation, but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this new … innovation in low-wage countries. We explain why levels of involvement in innovation vary across low-wage countries and even …