TY  - JOUR
AU  - Garcia-Macia, Daniel
AU  - Hsieh, Chang-Tai
AU  - Klenow, Peter J
TI  - How Destructive is Innovation?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 22953
PY  - 2016
Y2  - December 2016
DO  - 10.3386/w22953
UR  - http://www.nber.org/papers/w22953
L1  - http://www.nber.org/papers/w22953.pdf
N1  - Author contact info:
Daniel Garcia-Macia
European Department 
International Monetary Fund  
700 19th St NW  
Washington, DC 20431
E-Mail: dgarciamacia@imf.org

Chang-Tai Hsieh
Booth School of Business
University of Chicago
5807 S Woodlawn Ave
Chicago, IL 60637
Tel: 773/8340590
Fax: 484-589-3583
E-Mail: chsieh@chicagoBooth.edu

Peter J. Klenow
Department of Economics
579 Jane Stanford Way
Stanford University
Stanford, CA  94305-6072
Tel: 650/725-8169
Fax: NA
E-Mail: Klenow@Stanford.edu
M2  - featured in NBER digest on 2017-01-30
AB  - 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.
ER  -