How Destructive Is Innovation?
By Daniel Garcia-Macia, Chang-tai Hsieh, Pete Klenow. Econometrica, 2019
203 citations recorded by the source corpus.
Entrants and incumbents can create new products and displace the products of competitors. Incumbents can also improve their existing products. How much of aggregate productivity growth occurs through each of these channels? Using data from the U.S. Longitudinal Business Database on all nonfarm private businesses from 1983 to 2013, we arrive at three main conclusions: First, most growth appears to come from incumbents. We infer this from the modest employment share of entering firms (defined as those less than 5 years old). Second, most growth seems to occur through improvements of existing varieties rather than creation of brand new varieties. Third, own‐product improvements by incumbents appear to be more important than creative destruction. We infer this because the distribution of job creation and destruction has thinner tails than implied by a model with a dominant role for creative destruction.
View Paper: https://www.semanticscholar.org/paper/e249ea3a85babee57a331ed25ea404a025958ec6
How researchers see this paper
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- M. D. Ridder
- Michael Peters
- T. Boppart
- Huiyu Li
- Pete Klenow
- Peter J. Klenow
- Tomasz ëwiƒcki
- Thomas A. Gresik
Citations in the corpus
- Market Power and Innovation in the Intangible Economy (2019, methodology): “First, Li and Hall (2016) estimate depreciation rates of software investments to range between 30 and 40% per year.”
- Heterogeneous Markups, Growth, and Endogenous Misallocation (2020, background): “, 2015) and to measure the sources of US growth (Garcia-Macia et al., 2016).”
- A Theory of Falling Growth and Rising Rents (2019, methodology): “We emphasize creative destruction in our model, which contributes about one-fourth of overall growth according to Garcia-Macia et al. (2019) and Klenow and Li (2021).”
- Back to Basics: Basic Research Spillovers, Innovation Policy and Growth (2013, unknown): “In particular, models of endogenous technological change (see Aghion, Akcigit, and Howitt (2014) for a recent survey) mainly considered a uniform type of (applied) research and ignored basic research investment in the economy.”
- Missing Growth from Creative Destruction (2017, methodology): “The second approach applied the indirect inference of Garcia-Macia et al. (2016) to firm-level data.”