The Quest for Growth: Lesson from Professor Philippe Aghion

Henrik Helsen
Feb 19
4 min read

Professor Philippe Aghion at Warwick Economics Summit 2026

This article was written by Henrik Helsen a student at the University of Warwick. This article is part of his column 'The Policy Multiplier' and of his experience at WES26.

One of the most central questions in modern economics is: what drives sustained growth? Economic growth is widely regarded as desirable: higher incomes for workers, lower unemployment, and increased tax revenues for governments are three obvious benefits of a phenomenon that has only been a consistent feature of economic history for the past two hundred years.

In 1956, Robert Solow developed a model of economic growth that has since become the standard reference on the subject. In this framework, long-term per capita growth fundamentally depends on the evolution of total factor productivity (TFP) - an efficiency term that scales the production function, which is otherwise composed solely of factor inputs: labour and capital. What Solow left unexplained, however, was the source of TFP growth.

Following Paul Romer’s work on endogenising technological progress, Philippe Aghion and Peter Howitt emphasised the importance of innovation within a Schumpeterian framework. Their work treats so-called creative destruction as a central mechanism, alongside investment in research and development (R&D). In simple terms, their contribution is to make innovation the outcome of economic incentives, rather than an unexplained residual.

Creative destruction, one of Joseph Schumpeter’s key ideas, describes how new innovations and ideas continuously replace old ones, increasing industry productivity but also generating economic disruption and job losses. Entrepreneurs earn temporary profits, or “rents,” from their innovations, but these rents must not be so large that they allow incumbents to block future innovations that could render their own obsolete.

Having explained the core facets of the model, Aghion turned to contemporary macroeconomic issues. In particular, he addressed secular stagnation—the slowdown in productivity growth that has affected the UK and many other developed economies since the 2008 financial crisis. He interprets this through the lens of rising market concentration: increasing markups since the 1980s have reduced firms’ incentives to innovate. Weak antitrust enforcement in the US and elsewhere has reinforced these dynamics. Europe faces an additional challenge: its home-grown technology sector is small, with most patents in appliances or energy, whereas most US patents are in high-tech sectors. Since cutting-edge technologies drive productivity gains, this structural difference puts Europe at a disadvantage.

So how might these issues be addressed? Aghion outlined the key pillars of a sustainable economic model for Europe, combining American levels of innovation with Europe’s social protection system. The importance of competition and education remains fundamental. In the age of AI, it is increasingly clear that only highly skilled workers may be able to keep pace with emerging technologies such as artificial general intelligence.

Aghion also highlights the principle of flexisecurity, which emphasises protecting workers rather than specific jobs. Creative destruction necessarily involves job losses - AI will be no exception - but these losses are not inherently harmful if workers are supported. Denmark provides a working example: workers contribute a small portion of their salary to unemployment insurance and, if laid off, are entitled to up to 90% of their previous salary for up to two years. The results are striking: Danish workers experience stable health outcomes during unemployment, in contrast to the higher risk of “deaths of despair” (suicide, alcohol, drugs) observed in the United States.

The challenge of reviving stagnant economies will remain central for policymakers in the coming decades. In Europe, innovation is limited and per capita incomes have barely risen over the past ten years. The diagnoses and policy prescriptions outlined above are not magic bullets—they cannot overcome political hurdles or the risk of institutional capture in less resilient economies. Yet the Aghion–Howitt model offers a principled starting point for designing growth-oriented policy. Politicians and policymakers would be wise to heed Professor Aghion’s insights.

The views and opinions expressed in this article belong solely to the writer and do not necessarily reflect the views and opinions of the Warwick Economics Summit.

Reference List

Aghion, Philippe, and Peter Howitt. 1992. “A Model of Growth through Creative Destruction.” Econometrica 60 (2): 323–51. https://doi.org/10.2307/2951599.

De Loecker, Jan, and Jan Eeckhout. 2017. “The Rise of Market Power and Macroeconomic Implications.” https://www.nber.org/system/files/working_papers/w23687/w23687.pdf.

“Despite Impressive Patent Activity, Europe’s Small Deep Tech Businesses Lag behind Their US Counterparts | Epo.org.” 2022. Www.epo.org. 2022. https://www.epo.org/en/news-events/news/despite-impressive-patent-activity-europes-small-deep-tech-businesses-lag-behind.

Heggebø, Kristian. 2016. “Health Effects of Unemployment in Denmark, Norway and Sweden 2007–2010.” International Journal of Health Services 46 (3): 406–29. https://doi.org/10.1177/0020731416636365.

Lancieri, Filippo, Eric Posner, and Luigi Zingales. 2022. “The Political Economy of the Decline of Antitrust Enforcement in the United States.” SSRN Electronic Journal, no. 104. https://doi.org/10.2139/ssrn.4187134.

Silver, Sharon R., Jia Li, and Brian Quay. 2021. “Employment Status, Unemployment Duration, and Health‐Related Metrics among US Adults of Prime Working Age: Behavioral Risk Factor Surveillance System, 2018–2019.” American Journal of Industrial Medicine 65 (1): 59–71. https://doi.org/10.1002/ajim.23308.

Solow, Robert M. 1956. “A Contribution to the Theory of Economic Growth.” The Quarterly Journal of Economics 70 (1): 65–94. https://doi.org/10.2307/1884513.