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  4. August 2019
  5. Missing Growth from Creative Destruction

Missing Growth from Creative Destruction

  • Philippe Aghion
  • Antonin Bergeaud
  • Timo Boppart
  • Peter J. Klenow
  • Huiyu Li
American Economic Review
vol. 109, no. 8, August 2019
(pp. 2795-2822)
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Abstract

For exiting products, statistical agencies often impute inflation from surviving products. This understates growth if creatively-destroyed products improve more than surviving ones. If so, then the market share of surviving products should systematically shrink. Using entering and exiting establishments to proxy for creative destruction, we estimate missing growth in US Census data on non-farm businesses from 1983 to 2013. We find missing growth (i) equaled about one-half a percentage point per year; (ii) arose mostly from hotels and restaurants rather than manufacturing; and (iii) did not accelerate much after 2005, and therefore does not explain the sharp slowdown in growth since then.

Citation

Aghion, Philippe, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, and Huiyu Li. 2019. "Missing Growth from Creative Destruction." American Economic Review, 109 (8): 2795-2822. DOI: 10.1257/aer.20171745

Additional Materials

JEL Classification

  • E23 Macroeconomics: Production
  • E31 Price Level; Inflation; Deflation
  • L14 Transactional Relationships; Contracts and Reputation; Networks
  • L15 Information and Product Quality; Standardization and Compatibility
  • O30 Innovation; Research and Development; Technological Change; Intellectual Property Rights: General
  • O41 One, Two, and Multisector Growth Models