A Global View of Creative Destruction

46 Pages Posted: 18 Nov 2019 Last revised: 21 Apr 2021

See all articles by Chang-Tai Hsieh

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Peter Klenow

Stanford University

Ishan Nath

University of Chicago - Department of Economics

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Date Written: November 2019

Abstract

In the wake of the U.S.-Canada Free Trade Agreement, both the U.S. and Canada experienced a sustained increase in job reallocation, including firms moving into exporting. The change involved big firms as much as small firms. To mimic these patterns,we formulate a model of innovation by both domestic and foreign firms. In the model, trade liberalization quickens the pace of creative destruction, thereby speeding the flow of technology across countries. The resulting dynamic gains from trade liberalization are an order of magnitude larger than the gains in a standard static model.

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Suggested Citation

Hsieh, Chang-Tai and Klenow, Peter and Nath, Ishan, A Global View of Creative Destruction (November 2019). NBER Working Paper No. w26461, Available at SSRN: https://ssrn.com/abstract=3488961

Chang-Tai Hsieh (Contact Author)

University of Chicago - Booth School of Business ( email )

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University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
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National Bureau of Economic Research (NBER)

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Peter Klenow

Stanford University ( email )

Stanford, CA 94305
United States

Ishan Nath

University of Chicago - Department of Economics ( email )

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Chicago, IL 60637
United States

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