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Faculty Research Working Paper Series
Ricardo Hausmann
Professor of the Practice of Economic Development
phone: (617)496-3740
fax: (617)496-8753
Empirical Confirmation of Creative Destruction from World Trade Data
Klimek, Peter, Ricardo Hausmann, and Stefan Thurner. "Empirical Confirmation of Creative Destruction from World Trade Data." HKS Faculty Research Working Paper Series and CID Working Papers (RWP12-022 and 238), May 2012.
Abstract
We show that world trade network datasets contain empirical evidence that the dynamics of innovation in the world economy follows indeed the concept of creative destruction, as proposed by J.A. Schumpeter more than half a century ago. National economies can be viewed as complex, evolving systems, driven by a stream of appearance and disappearance of goods and services. Products appear in bursts of creative cascades. We find that products systematically tend to co-appear, and that product appearances lead to massive disappearance events of existing products in the following years. The opposite – disappearances followed by periods of appearances – is not observed. This is an empirical validation of the dominance of cascading competitive replacement events on the scale of national economies, i.e. creative destruction. We find a tendency that more complex products drive out less complex ones, i.e. progress has a direction. Finally we show that the growth trajectory of a country’s product output diversity can be understood by a recently proposed evolutionary model of Schumpeterian economic dynamics.
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