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Quantifying creative destruction: Entrepreneurship and productivity in New Zealand

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  • John McMillan

Abstract

This paper (a) provides a framework for quantifying any economy's flexibility, and (b) reviews the evidence on New Zealand firms' birth, growth and death. The data indicate that, by and large, the labour market and the financial market are doing their job. Creative destruction “revolutionizes the economic structure from within,” Joseph Schumpeter famously said, “incessantly destroying the old one, incessantly creating a new one” (Schumpeter, 1975, p. 83). Innovation in business - bringing new goods, new markets, new methods of production, new ways of organizing firms - is the “fundamental impulse that sets and keeps the capitalist engine in motion.” Does the economy have enough flexibility? Are there barriers in the way of entrepreneurship? This paper develops a framework for quantifying creative destruction. Applying the framework to New Zealand, I conclude that the sluggish productivity growth of the past fifteen years cannot be blamed on economic rigidities. The data depict an economy with ample creative destruction. Ascribing New Zealand's slow growth to a business-unfriendly culture is a misdiagnosis.

Suggested Citation

  • John McMillan, 2004. "Quantifying creative destruction: Entrepreneurship and productivity in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 38(2), pages 153-173.
  • Handle: RePEc:taf:nzecpp:v:38:y:2004:i:2:p:153-173
    DOI: 10.1080/00779950409544401
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    References listed on IDEAS

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    1. W A Razzak, 2004. "Towards Building A New Consensus About New Zealand’s Productivity," GE, Growth, Math methods 0405002, EconWPA.
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    Cited by:

    1. Grimes, Arthur, 2005. "Regional and industry cycles in Australasia: Implications for a common currency," Journal of Asian Economics, Elsevier, vol. 16(3), pages 380-397, June.
    2. Procter, Roger, 2008. "Inside the Black box: Policies for Economic Growth," Occasional Papers 08/8, Ministry of Economic Development, New Zealand.
    3. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
    4. Christine Tamásy & Richard Le Heron, 2008. "The Geography Of Firm Formation In New Zealand," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 99(1), pages 37-52, February.
    5. repec:spr:jbuscr:v:12:y:2016:i:1:d:10.1007_s41549-016-0001-6 is not listed on IDEAS
    6. Michelle Poland & David C Maré, 2005. "Defining Geographic Communities," Urban/Regional 0509016, EconWPA.
    7. W. A. Razzak, 2016. "New Zealand Labor Market Dynamics: Pre- and Post-global Financial Crisis," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 12(1), pages 49-79, September.
    8. David C Maré, 2005. "Indirect Effects of Active Labour Market Policies," HEW 0509004, EconWPA.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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