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A Global View of Creative Destruction


  • Chang-Tai Hsieh
  • Peter J. Klenow
  • Ishan Nath


We formulate a two-country model of trade and creative destruction by domestic and foreign firms. In the model, trade liberalization quickens the pace of creative destruction and the flow of technology across countries. International idea flows are essential for understanding why country technologies do not drift apart and for matching two empirical facts. First, contracting firms are more likely to lose exports than domestic sales, whereas the opposite is true for expanding firms. Second, the product composition of a country’s exports exhibits ample turnover. In our model, a country’s comparative advantage is constantly shifting due to global creative destruction.

Suggested Citation

  • Chang-Tai Hsieh & Peter J. Klenow & Ishan Nath, 2023. "A Global View of Creative Destruction," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(2), pages 243-275.
  • Handle: RePEc:ucp:jpemac:doi:10.1086/724833
    DOI: 10.1086/724833

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    Cited by:

    1. Traiberman, Sharon & Rotemberg, Martin, 2023. "Precautionary protectionism," Journal of International Economics, Elsevier, vol. 145(C).

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