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Winners and Losers: Competition, Creative Destruction, and Labor Income Risk

Author

Listed:
  • Brice C. Green
  • Leonid Kogan
  • Dimitris Papanikolaou
  • Lawrence D.W. Schmidt

Abstract

Using U.S. administrative data, we find that technology-driven creative destruction in the product market passes through to worker earnings. The passthrough to incumbent worker earnings is both asymmetric and concentrated: profit drops from rival innovations lead to proportionally greater earnings declines and changes in the likelihood of job destruction than profit gains from their own firm’s innovations, while top workers are significantly more exposed than the average worker. We develop an endogenous-growth model with monopsonistic labor markets and worker heterogeneity that replicates this asymmetry and the distribution of earnings risk. In the model, creative destruction exposes high-income workers to concentrated downside risk while increasing upward mobility for lower-income workers, shaping the welfare consequences of innovation policy.

Suggested Citation

  • Brice C. Green & Leonid Kogan & Dimitris Papanikolaou & Lawrence D.W. Schmidt, 2026. "Winners and Losers: Competition, Creative Destruction, and Labor Income Risk," NBER Working Papers 35542, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35542
    Note: AP EFG PR
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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