Missing Growth from Creative Destruction

Philippe Aghion; Antonin Bergeaud; Timo Boppart; Peter J. Klenow; Huiyu Li

doi:10.1257/aer.20171745

American Economic Review Vol. 109 No. 8 2019

Missing Growth from Creative Destruction

Philippe Aghion¹; Antonin Bergeaud²; Timo Boppart³; Peter J. Klenow⁴; Huiyu Li ⁵

¹ Collège de France, 3 Rue d’Ulm, 75005 Paris, France, and London School of Economics (email: ) · ² Banque de France, 31 Rue Croix des Petits Champs, 75001 Paris, France (email: ) · ³ Institute for International Economic Studies, Stockholm University, SE-106 91 Stockholm, Sweden (email: ) · ⁴ Department of Economics, Stanford University, Stanford, CA 94305 (email: ) · ⁵ Federal Reserve Bank of San Francisco, Economics Research, 101 Market Street, San Francisco, CA 94105 (email: )

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.

DOI: 10.1257/aer.20171745
Volume: 109
Issue: 8
Pages: 2795-2822
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Missing Growth from Creative Destruction

Abstract

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