Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?

Francois Gourio and Leena Rudanko

American Economic Review, 2014, vol. 104, issue 5, 183-88

Abstract: Intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses. We demonstrate that intangible capital can have a substantial impact on business cycle dynamics, especially if the intangible is complementary with production capacity. We focus on customer capital: the capital embodied in the relationships a firm has with its customers. Introducing customer capital into a standard real business cycle model generates a volatile and countercyclical labor wedge, due to a mismeasured marginal product of labor. We also provide new evidence on cyclical variation in selling effort to discipline the exercise.

JEL-codes: D92 E13 E22 E24 E32 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.5.183
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Citations: View citations in EconPapers (20)

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Working Paper: Can Intangible Capital Explain Cyclical Movements in the Labor Wedge? (2014)
Working Paper: Can Intangible Capital Explain Cyclical Movements in the Labor Wedge? (2014)
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