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Creative Destruction and the Measurement of Productivity Change

Author Info

  • John Stanley Metcalfe
  • Ronnie Ramlogan

Abstract

Recent advances in the measurement of productivity change have exposed a much clearer picture of the turbulent dynamics of restless capitalism. This essay has two objectives. First, to show that the population method drawn from evolutionary theory provides a coherent frame in which the various processes impinging on productivity change can be integrated. Secondly, to identify some of the puzzles and ambiguities that arise from decomposing any aggregate measure of productivity growth into innovation effects in firms and selection effects in markets. We shall also show that there is no unique way of making this decomposition. This is an important matter because the transmission process between innovation and changing resource allocation underpins the process of economic development in the broad sense. JEL Classification: D24, E11, O30, O40.

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Article provided by Presses de Sciences-Po in its journal Revue de l'OFCE.

Volume (Year): 97 bis (2006)
Issue (Month): 5 ()
Pages: 373-397

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Handle: RePEc:cai:reofsp:reof_073_0373
Contact details of provider: Web page: http://www.cairn.info/revue-de-l-ofce.htm

Keywords: productivity change and evolutionary population dynamics; fisher price theorems;

Find related papers by JEL classification:

  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
  • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

References listed on IDEAS
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  1. Nelson, Richard R., 1989. "Industry growth accounts and production functions when techniques are idiosyncratic," Journal of Economic Behavior & Organization, Elsevier, vol. 11(3), pages 323-341, May.
  2. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
  3. J.S Metcalfe, 2004. "Accounting for Evolution: An Assessment of the Population Method," Papers on Economics and Evolution 2004-21, Philipps University Marburg, Department of Geography.
  4. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07.
  5. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  6. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
  7. Thorbjørn Knudsen, 2004. "General selection theory and economic evolution: The Price equation and the replicator/interactor distinction," Journal of Economic Methodology, Taylor & Francis Journals, vol. 11(2), pages 147-173.
  8. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  9. Wendy Carlin & Jonathan Haskel & Paul Seabright, 2001. "Understanding ‘The Essential Fact about Capitalism’: Markets, Competition and Creative Destruction," National Institute Economic Review, National Institute of Economic and Social Research, vol. 175(1), pages 67-84, January.
  10. Uwe Cantner & Jens Krüger, 2008. "Micro-heterogeneity and aggregate productivity development in the German manufacturing sector," Journal of Evolutionary Economics, Springer, vol. 18(2), pages 119-133, April.
  11. Gu, Wulong & Baldwin, John R., 2006. "Competition, Firm Turnover and Productivity Growth," Economic Analysis (EA) Research Paper Series 2006042e, Statistics Canada, Analytical Studies Branch.
  12. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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Cited by:

  1. Uwe Cantner & Ivan Savin & Simone Vannuccini, 2016. "Replicator dynamics in value chains: explaining some puzzles of market selection," Working Papers of BETA 2016-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  2. Esben Andersen & Jacob Holm, 2014. "The signs of change in economic evolution," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 291-316, April.
  3. J. Stan Metcalfe & John Foster, 2010. "Evolutionary Growth Theory," Chapters, in: Handbook of Alternative Theories of Economic Growth, chapter 3 Edward Elgar Publishing.
  4. John Metcalfe, 2008. "Accounting for economic evolution: Fitness and the population method," Journal of Bioeconomics, Springer, vol. 10(1), pages 23-49, April.
  5. Esben Sloth Andersen & Jacob Rubæk Holm, 2013. "Directional, stabilizing and disruptive selection: An analysis of aspects of economic evolution based on Price’s equation," DRUID Working Papers 13-10, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.

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