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Brian Graf

the CPI might generate more bias. Typically, the price of a revolutionary product declines rapidly after introduction, so there would be an upward bias in delaying its introduction, again to the detriment of the credibility of the CPI regarding what may be high-profile products. Exiting products have the opposite welfare effect of new products and excluding the welfare loss of the exiting products would result in a downward biased CPI. Evolutionary and Revolutionary Products: A Continuum 7.66 Evolutionary new products can be linked, with a quality

Mr. Rabah Arezki, Mr. Daniel Lederman, and Mr. Hongyan Zhao

sample, we chose goods that have price information for the whole time period from January 2002 to April 2011. Thus, our sample is reduced to 7, 842 goods, which is about 60% of the total number of goods (12, 955) in the benchmark sample. Indeed, Table 3 shows that there is quite a bit of product exit in manufactured products. It is also noteworthy that there is a notable increase in the number of entering and exiting products in 2007, which is very likely due to changes in the trade classification and reporting systems. However, Figure 5 shows that even when

Mr. Rabah Arezki, Mr. Daniel Lederman, and Mr. Hongyan Zhao
This paper studies the volatility of commodity prices on the basis of a large dataset of monthly prices observed in international trade data from the United States over the period 2002 to 2011. The conventional wisdom in academia and policy circles is that primary commodity prices are more volatile than those of manufactured products, even though most of the existing evidence does not actually attempt to measure the volatility of prices of individual goods or commodities. Rather the literature tends to focus on trends in the evolution and volatility of ratios of price indexes composed of multiple commodities and products. This approach can be misleading. Indeed, the evidence presented in this paper suggests that on average prices of individual primary commodities may be less volatile than those of individual manufactured goods.
Mr. Roberto Piazza and Yu Zheng
This paper extends the Schumpeterian model of creative destruction by allowing followers’ cost of innovation to increase in their technological distance from the leader. This assumption is motivated by the observation the more technologically ad- vanced the leader is, the harder it is for a follower to leapfrog without incurring extra cost for using leader’s patented knowledge. Under this R&D cost structure, leaders innovate to increase their technological advantage so that followers will eventually stop innovating, allowing leadership to prevail. A new steady state then emerges featuring both leaders and followers innovating in few industries with low aggregate growth.
Mr. Roberto Piazza and Yu Zheng

1 Introduction The Schumpeterian idea of creative destruction lies at the heart of the innovation-based growth theory ( Grossman and Helpman, 1991 ; Aghion and Howitt, 1992 ). Under this view, growth is achieved by entrepreneurs or firms successively undertaking costly R&D to improve and replace each other’s exiting product. There are two key ingredients to Schumpeter’s theory of creative destruction. First, a successful innovator or leader, by launching a new product in the market, reveals the frontier knowledge embodied in the product to potential

Shai Bernstein, Emanuele Colonnelli, Mr. Davide Malacrino, and Tim McQuade
New firm formation is a critical driver of job creation, and an important contributor to the responsiveness of the economy to aggregate shocks. In this paper we examine the characteristics of the individuals who become entrepreneurs when local opportunities arise due to an increase in local demand. We identify local demand shocks by linking fluctuations in global commodity prices to municipality level agricultural endowments in Brazil. We find that the firm creation response is almost entirely driven by young and skilled individuals, as measured by their level of experience, education, and past occupations involving creativity, problem-solving and managerial roles. In contrast, we find no such response within the same municipalities among skilled, yet older individuals, highlighting the importance of lifecycle considerations. These responsive individuals are younger and more skilled than the average entrepreneur in the population. The entrepreneurial response of young individuals is larger in municipalities with better access to finance, and in municipalities with more skilled human capital. These results highlight how the characteristics of the local population can have a significant impact on the entrepreneurial responsiveness of the economy.
Shai Bernstein, Emanuele Colonnelli, Mr. Davide Malacrino, and Tim McQuade

Economic Review , 2010 , 100 ( 2 ), 629 – 33 . Caliendo , Lorenzo and Esteban Rossi-Hansberg , “The Impact of Trade on Organization and Productivity,” The Quarterly Journal of Economics , 2012 , 127 ( 3 ), 1393 – 1467 . Chaney , Thomas , “Distorted gravity: the intensive and extensive margins of international trade,” American Economic Review , 2008 , 98 ( 4 ), 1707 – 21 . Chatterjee , Satyajit and Russell Cooper , “Entry and exit, product variety, and the business cycle,” Economic Inquiry , 2014 , 52 ( 4 ), 1466