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Empirical Confirmation of Creative Destruction from World Trade Data

Author

Listed:
  • Klimek, Peter

    (Medical University of Vienna)

  • Hausmann, Ricardo

    (Harvard University and Santa Fe Institute)

  • Thurner, Stefan

    (Medical University of Vienna and Santa Fe Institute)

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.

Suggested Citation

  • Klimek, Peter & Hausmann, Ricardo & Thurner, Stefan, 2012. "Empirical Confirmation of Creative Destruction from World Trade Data," Working Paper Series rwp12-022, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp12-022
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    7. Klimek, Peter & Poledna, Sebastian & Doyne Farmer, J. & Thurner, Stefan, 2015. "To bail-out or to bail-in? Answers from an agent-based model," Journal of Economic Dynamics and Control, Elsevier, vol. 50(C), pages 144-154.
    8. Freire Junior, Clovis, 2017. "Economic diversification: Explaining the pattern of diversification in the global economy and its implications for fostering diversification in poorer countries," MERIT Working Papers 2017-033, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Eduardo Lora, 2016. "The Path to Labor Formality: Urban Agglomeration and the Emergence of Complex Industries," Growth Lab Working Papers 83, Harvard's Growth Lab.
    10. Kemp-Benedict, Eric, 2014. "An interpretation and critique of the Method of Reflections," MPRA Paper 60705, University Library of Munich, Germany.
    11. Orazio Angelini & Matthieu Cristelli & Andrea Zaccaria & Luciano Pietronero, 2016. "The complex dynamics of products and its asymptotic properties," Papers 1610.00274, arXiv.org, revised May 2017.
    12. Klaus Friesenbichler & Ina Meyer, 2022. "Sectoral and Environmentally Friendly Growth Potential in Uganda," WIFO Studies, WIFO, number 68032.
    13. Shana M. Sundstrom & Craig R. Allen & David G. Angeler, 2020. "Scaling and discontinuities in the global economy," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 319-345, April.
    14. Friesenbichler, Klaus S. & Kügler, Agnes, 2022. "Servitization across countries and sectors: Evidence from world input-output data," Economic Systems, Elsevier, vol. 46(3).
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    16. Freire, Clovis, 2019. "Economic diversification: A model of structural economic dynamics and endogenous technological change," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 13-28.
    17. Salvador Pueyo, 2014. "Ecological Econophysics for Degrowth," Sustainability, MDPI, vol. 6(6), pages 1-53, May.
    18. Hötte, Kerstin, 2020. "How to accelerate green technology diffusion? Directed technological change in the presence of coevolving absorptive capacity," Energy Economics, Elsevier, vol. 85(C).
    19. Andreas Reinstaller & Elisabeth Christen & Harald Oberhofer & Peter Reschenhofer, 2016. "Eine Analyse der Wettbewerbsfähigkeit Österreichs im bilateralen Handel mit den USA (TTIP)," WIFO Studies, WIFO, number 58723.
    20. Castañeda, Gonzalo & Pietronero, Luciano & Romero-Padilla, Juan & Zaccaria, Andrea, 2022. "The complex dynamic of growth: Fitness and the different patterns of economic activity in the medium and long terms," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 231-246.
    21. Werner Hölzl, 2021. "Structural Change towards Services," WIFO Working Papers 631, WIFO.
    22. Viviana Viña-Cervantes & Michele Coscia & Renaud Lambiotte, 2018. "The struggle for existence in the world market ecosystem," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-20, October.

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