Product Creation and Destruction: Evidence and Price Implications

Christian Broda and David Weinstein

American Economic Review, 2010, vol. 100, issue 3, 691-723

Abstract: This paper describes the extent of product creation and destruction in a large sector of the US economy. We find four times more entry and exit in product markets than is found in labor markets because most product turnover happens within firms. Net product creation is strongly procyclical and primarily driven by creation rather than destruction. We find that a cost-of-living index that takes product turnover into account is 0.8 percentage points per year lower than a "fixed goods" price index like the CPI. The procyclicality of the bias implies that business cycles are more volatile than indicated by official statistics. (JEL E31, E32, L11, O31)

JEL-codes: E31 E32 L11 O31 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/aer.100.3.691
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Citations: View citations in EconPapers (391)

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Working Paper: Product Creation and Destruction: Evidence and Price Implications (2007)
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