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Creative Destruction and the Measurement of Productivity Change

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  • 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
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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. 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.
  3. 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.
  4. Bartelsman, Eric & Haltiwanger, John & Scarpetta1, Stefano, 2004. "Microeconomic evidence of creative destruction in industrial and developing countries," Policy Research Working Paper Series 3464, The World Bank.
  5. Gu, Wulong & Baldwin, John R., 2006. "Competition, Firm Turnover and Productivity Growth," Economic Analysis (EA) Research Paper Series 2006042e, Statistics Canada, Analytical Studies Branch.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Harberger, Arnold C, 1998. "A Vision of the Growth Process," American Economic Review, American Economic Association, vol. 88(1), pages 1-32, March.
  11. 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.
  12. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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Cited by:

  1. John Metcalfe, 2008. "Accounting for economic evolution: Fitness and the population method," Journal of Bioeconomics, Springer, vol. 10(1), pages 23-49, April.
  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, 2009. "Evolutionary Growth Theory," Discussion Papers Series 388, School of Economics, University of Queensland, Australia.
  4. 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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