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Missing Growth from Creative Destruction

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, Huiyu Li

NBER Working Paper No. 24023
Issued in November 2017, Revised in April 2018
NBER Program(s):Economic Fluctuations and Growth, Productivity, Innovation, and Entrepreneurship

Statistical agencies typically impute inflation for disappearing products based on surviving products, which may result in overstated inflation and understated growth. Using U.S. Census data, we apply two ways of assessing the magnitude of “missing growth” for private nonfarm businesses from 1983–2013. The first approach exploits information on the market share of surviving plants. The second approach applies indirect inference to firm-level data. We find: (i) missing growth from imputation is substantial — at least 0.6 percentage points per year; and (ii) most of the missing growth is due to creative destruction (as opposed to new varieties).

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Document Object Identifier (DOI): 10.3386/w24023

Published: Philippe Aghion & Antonin Bergeaud & Timo Boppart & Peter J. Klenow & Huiyu Li, 2019. "Missing Growth from Creative Destruction," American Economic Review, vol 109(8), pages 2795-2822.

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