Missing Growth from Creative Destruction

42 Pages Posted: 6 Dec 2017

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Antonin Bergeaud

Banque de France

Timo Boppart

Stockholm University - Institute for International Economic Studies (IIES); University of Zurich - Department of Economics

Peter J. Klenow

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Huiyu Li

Federal Reserve Banks - Federal Reserve Bank of San Francisco

Multiple version iconThere are 3 versions of this paper

Date Written: December 2017

Abstract

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).

Keywords: Growth, Price measurement, Firm dynamics

JEL Classification: O4

Suggested Citation

Aghion, Philippe and Bergeaud, Antonin and Boppart, Timo and Klenow, Peter J. and Li, Huiyu, Missing Growth from Creative Destruction (December 2017). Banque de France Working Paper No. 649. Available at SSRN: https://ssrn.com/abstract=3082868 or http://dx.doi.org/10.2139/ssrn.3082868

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Antonin Bergeaud

Banque de France ( email )

Paris
France

Timo Boppart

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

University of Zurich - Department of Economics ( email )

Zürich, CH-8006
Switzerland

Peter J. Klenow

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Huiyu Li

Federal Reserve Banks - Federal Reserve Bank of San Francisco

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