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Creative Destruction and the Measurement of Productivity Change

  • John Stanley Metcalfe
  • Ronnie Ramlogan

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
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  1. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau.
  2. 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.
  3. James Tybout, 1999. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Development and Comp Systems 9906001, EconWPA, revised 10 Jun 1999.
  4. Gu, Wulong & Baldwin, John R., 2006. "Competition, Firm Turnover and Productivity Growth," Economic Analysis (EA) Research Paper Series 2006042e, Statistics Canada, Analytical Studies Branch.
  5. 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.
  6. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. 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.
  8. 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.
  9. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  10. 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.
  11. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
  12. Thorbj�rn 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.
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