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Empirical confirmation of creative destruction from world trade data

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  • Peter Klimek
  • Ricardo Hausmann
  • Stefan Thurner

Abstract

We show that world trade network datasets contain empirical evidence that the dynamics of innovation in the world economy follows indeed the concept of creative destruction, as proposed by J.A. Schumpeter more than half a century ago. National economies can be viewed as complex, evolving systems, driven by a stream of appearance and disappearance of goods and services. Products appear in bursts of creative cascades. We find that products systematically tend to co-appear, and that product appearances lead to massive disappearance events of existing products in the following years. The opposite - disappearances followed by periods of appearances - is not observed. This is an empirical validation of the dominance of cascading competitive replacement events on the scale of national economies, i.e. creative destruction. We find a tendency that more complex products drive out less complex ones, i.e. progress has a direction. Finally we show that the growth trajectory of a country's product output diversity can be understood by a recently proposed evolutionary model of Schumpeterian economic dynamics.

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File URL: http://arxiv.org/pdf/1112.2984
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Paper provided by arXiv.org in its series Papers with number 1112.2984.

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Date of creation: Dec 2011
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Handle: RePEc:arx:papers:1112.2984

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Web page: http://arxiv.org/

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  1. Philippe Aghion & Johannes Fedderke & Peter Howitt & Chandana Kularatne & Nicola Viegi, 2008. "Testing Creative Destruction in an Opening Economy : the Case of the South African Manufacturing Inudstries," Documents de Travail de l'OFCE 2008-23, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Eric J. Bartelsman & John Haltiwanger & Stefano Scarpetta, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," Tinbergen Institute Discussion Papers 04-114/3, Tinbergen Institute.
  3. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  4. Ricardo Hausmann & Cesar A. Hidalgo, 2011. "The Network Structure of Economic Output," Papers 1101.1707, arXiv.org, revised Feb 2012.
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