joint with Chang-Tai Hsieh and Ishan Nath

Exports exhibit the telltale sign of creative destruction on a global scale: simultaneous expansion and contraction across categories and firms. The exports of exporting firms are considerably more volatile than the domestic sales of the same firms. To mimic these patterns, we formulate a model of creative destruction by domestic and foreign firms. In the model, trade liberalization (or openness to idea flows more generally) quickens the pace of creative destruction and facilitates the flow of technology across countries. The resulting dynamic gains from idea flows are at least as large as the static gains from trade.

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