Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter Klenow, Huiyu Li, 16 August 2017

Slowing growth of total factor productivity has led some to suggest that the world is running out of ideas for innovation. This column suggests that the way output is measured is vital to assessing this, and quantifies the role of imputation in output measurement bias. By differentiating between truly ‘new’ and incumbent products, it finds missing growth in the US economy. Accounting for this missing growth will allow statistical offices to improve their methodology and more readily recognise the ready availability of new ideas, but also has implications for optimal growth and inflation targeting policies.

Dan Andrews, Chiara Criscuolo, Peter Gal, 27 March 2017

Even before the Global Crisis, productivity growth had slowed in many OECD countries. This column argues that the global slowdown at the aggregate level masks a deterioration in both productivity growth within firms and a process of creative destruction. Using a cross-country firm-level database for 24 countries, the authors reveal an increasing productivity gap between the global frontier and laggard firms, fewer exits by weak firms, and a decline in entry. These problems have been compounded by the failure of policy to encourage the diffusion of best practices in OECD countries.

Hirofumi Uchida, Arito Ono, 11 February 2015

It seems like natural disasters should harm the economy by destroying lives and capital. This column investigates the extent to which disasters can lead to creative destruction through ‘natural selection’ of the fittest firms. Surprisingly, the rate of closure due to bankruptcy decreases – perhaps due to aid. Firm exits following the Tohoku earthquake were predominantly voluntary closures, with firms seizing the moment in order to leave an ageing market.

Lant Pritchett, Lawrence Summers, 11 December 2014

Dozens of nations think they are in the ‘middle-income trap’. Lant Pritchett and Larry Summers present new evidence that this trap is actually just growth reverting to its mean. This matters since belief in the ‘trap’ can lead governments to misinterpret current challenges. For lower-middle-income nations the 21st century beckons, but there are still 19th century problems to address. Moreover, sustaining rapid growth requires both parts of creative destruction, but only one is popular with governments and economic elites.

Yoonsoo Lee, Toshihiko Mukoyama, 07 January 2008

It is commonly believed that business cycles ‘cleanse’ industry with waves of creative destruction. New research shows that entry is higher in booms than busts, but exit rates and the type of exiting firms, are steady over the cycle. Plants entering during recessions, however, are larger and more productive –‘creative entry’ rather than ‘creative destruction’.