A Model of Growth Through Creative Destruction
· Econometrica lists an issue month but no publication day; 15 March is used as a neutral sorting date.
Summary
Aghion and Howitt model growth as a sequence of innovations: each successful technology creates a temporary rent while making the previous one obsolete. Research effort, the size and likelihood of innovations, market power, and the threat of future obsolescence jointly determine the economy’s growth rate.
Why it matters
The model is a foundation for analyzing how faster AI-driven innovation could create new products and firms while displacing older technologies and rents. It also shows why stronger innovation incentives and faster creative destruction do not translate mechanically into socially optimal or broadly shared gains.
What to keep in mind
This is a stylized growth model, not evidence about current AI markets. Its conclusions depend on a particular innovation process and do not by themselves show whether concentrated model markets, incumbent advantages, or rapid entry will accelerate or slow progress.