Missing Growth from Creative Destruction
Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, Huiyu Li
American Economic Review · 2019 · Volume 109 · Issue 8
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.
Keywords
Macroeconomics: Production, Price Level, Inflation, Deflation, Transactional Relationships, Contracts and Reputation, Networks, Information and Product Quality, Standardization and Compatibility, Innovation, Research and Development, Technological Change, Intellectual Property Rights: General, One, Two, and Multisector Growth Models
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