Intangible Investment and Low Inflation: A Framework and Some Evidence

Subir Lall and Li Zeng

No 2020/190, IMF Working Papers from International Monetary Fund

Abstract: Intangible investment is growing as a share of economic activity. We present a simple framework incorporating its distinguishing characteristic of generally greater scalability and lower marginal costs than tangible investment. We show evidence that this may have contributed to more elastic aggregate supply in recent years, which is consistent with lower inflation and a flattening of the Phillips curve. This framework also highlights the channels through which technological change, a large constituent of intangible investment, may be leading to wage stagnation and greater market concentration.

Keywords: WP; intangible investment; investment; economy; Technological change; inflation; unemployment; market concentration; AS-AD framework; inflation target; import price inflation; aggregate supply supply curve; Intangible capital; Inflation targeting; Output gap; Import prices; Global; returns to scale (search for similar items in EconPapers)
Pages: 26
Date: 2020-09-18
New Economics Papers: this item is included in nep-gro and nep-mac
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