Productivity growth is the engine of economic growth and is responsible for rising standards of living. But all firms do not partake equally in the nation's productivity growth. Rather, according to economist Joseph Schumpeter's theory, firms undergo a process of "creative destruction": New firms that adapt to new knowledge cause the decline and eventual demise of incumbent firms. In "Creative Destruction and Aggregate Productivity Growth," Shigeru Fujita surveys recent studies that examine the role of creative destruction in aggregate productivity growth.
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Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.