Missing Growth from Creative Destruction

Philippe Aghion (1, 2, 3, 4) , Antonin Bergeaud (5) , Timo Boppart (6) , Peter Klenow (7) , Huiyu Li (8)

1 Harvard University
2 LSE - London School of Economics and Political Science
3 PSE - Paris School of Economics
4 PJSE - Paris Jourdan Sciences Economiques
5 Centre de recherche de la Banque de France
6 Stockholm University
7 Stanford University
8 Federal Reserve Bank of San Francisco

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.

Domaines: Economies et finances

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter Klenow, Huiyu Li. Missing Growth from Creative Destruction. American Economic Review, 2019, 109 (8), pp.2795-2822. ⟨10.1257/aer.20171745⟩. ⟨halshs-02301545⟩