A Global View of Creative Destruction

47 Pages Posted: 20 Nov 2019

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 J. Klenow

Stanford University

Ishan Nath

University of Chicago - Department of Economics

Multiple version iconThere are 2 versions of this paper

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.

JEL Classification: F11, F14, F43

Suggested Citation

Hsieh, Chang-Tai and Klenow, Peter J. and Nath, Ishan, A Global View of Creative Destruction (November 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-133, Available at SSRN: https://ssrn.com/abstract=3489367 or http://dx.doi.org/10.2139/ssrn.3489367

Chang-Tai Hsieh (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Peter J. Klenow

Stanford University ( email )

Stanford, CA 94305
United States

Ishan Nath

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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