Mechanisms of Schumpeterian Competition

This paper suggests employing Price's equation for mapping the evolution of productivity. It is discussed how the elements of the equation correspond to the various elements of Schumpeterian theories and models of economic evolution. Key elements are economic selection, entrepreneurship and innovation. It is then discussed how a strain of productivity studies, referred to here as "productivity accounting", may be re-interpreted as employing Price's equation. By comparing such studies of Sweden and America to results for the Danish economy it is possible to identify differences in the evolution of labour productivity in these countries. It turns out that in all three countries Schumpeter's Mark I model of evolution is more typical for service industries than for manufacturing industries and economic selection is  trongest in manufacturing industries. The differences between Sweden and Denmark are few, but there are differences between these two Scandinavian countries and the US. Particularly the American service industries are set apart. They generally show strong selection, which is cancelled out by intra firm change towards lower productivity, so that productivity growth is almost exclusively attributed to new firms. In the Scandinavian countries productivity growth in service industries is attributed to a balance of intra rm change and new firms.