Thursday, April 6, 2017 - 4:10pm to 6:00pm
Center on Capitalism and Society, Columbia University
In this seminar, Professor Aghion discusses his paper "Missing Growth from Creative Destruction." Writes Professor Aghion, "Statistical agencies typically impute inﬂation for disappearing products from the inﬂation rate for surviving products. As some products disappear precisely because they are displaced by better products, inﬂation may be lower at these points than for surviving products. As a result, creative destruction may result in overstated inﬂation and understated growth. We use a simple model to relate this “missing growth” to the frequency and size of various kinds of innovations. Using U.S. Census data, we then apply two ways of assessing the magnitude of missing growth for all private nonfarm businesses for 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—0.5 percentage points per year when using the ﬁrst approach, 1 percentage point per year using the second method; and (ii) almost all of the missing growth is due to creative destruction (as opposed to new varieties)."