How Destructive is Innovation? / Daniel Garcia-Macia, Chang-Tai Hsieh, Peter J. Klenow.

Format:

Book

Author/Creator:

Garcia-Macia, Daniel.

Contributor:

National Bureau of Economic Research.

Hsieh, Chang-Tai.

Klenow, Peter J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22953.

NBER working paper series no. w22953

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

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.

Notes:

Print version record

December 2016.