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Missing Growth from Creative Destruction

Author

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  • Philippe Aghion

    (Harvard University, LSE - London School of Economics and Political Science, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Antonin Bergeaud

    (Centre de recherche de la Banque de France - Banque de France)

  • Timo Boppart

    (Stockholm University)

  • Peter Klenow

    (Stanford University)

  • Huiyu Li

    (Federal Reserve Bank of San Francisco)

Abstract

For exiting products, statistical agencies often impute inflation from surviving products. This understates growth if creatively-destroyed products improve more than surviving ones. If so, then the market share of surviving products should systematically shrink. Using entering and exiting establishments to proxy for creative destruction, we estimate missing growth in US Census data on non-farm businesses from 1983 to 2013. We find missing growth (i) equaled about one-half a percentage point per year; (ii) arose mostly from hotels and restaurants rather than manufacturing; and (iii) did not accelerate much after 2005, and therefore does not explain the sharp slowdown in growth since then.

Suggested Citation

  • Philippe Aghion & Antonin Bergeaud & Timo Boppart & Peter Klenow & Huiyu Li, 2019. "Missing Growth from Creative Destruction," PSE-Ecole d'économie de Paris (Postprint) halshs-02301545, HAL.
    • Handle: RePEc:hal:pseptp:halshs-02301545
    DOI: 10.1257/aer.20171745
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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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