Intangible Capital, the Labor Wedge and the Volatility of Corporate Profits
Keqiang Hou () and
Alok Johri ()
Review of Economic Dynamics, 2018, vol. 29, 216-234
Corporate profit is six times more volatile than output. We estimate a dynamic general equilibrium model with intangible capital (IC) using aggregate data on output, investment and hours and find that it generates profits that are over five times as volatile as output. A similar model without IC relies on preference shocks to generate profits that are 3.5 times as volatile as output. Variance decomposition analysis reveals that shocks to IC productivity account for 85 % of the variance of output, and over 50 % of hours and investment. The increased volatility of profits is associated with a time-varying wedge between wages and the marginal product of labor which is shown to be highly correlated with the data-based labor wedge. The estimation identifies the sixties and the nineties as periods of rapid IC accumulation. (Copyright: Elsevier)
Keywords: Business cycles; Aggregate profits; Bayesian estimation; Intangible capital; Labor wedge (search for similar items in EconPapers)
JEL-codes: E3 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.
Working Paper: Intangible Capital, the Labor Wedge and the Volatility of Corporate Profits (2018)
Software Item: Code and data files for "Intangible Capital, the Labor Wedge and the Volatility of Corporate Profits" (2017)
Working Paper: Online Appendix to "Intangible Capital, the Labor Wedge and the Volatility of Corporate Profits" (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:issued:10-111
Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/
Access Statistics for this article
Review of Economic Dynamics is currently edited by Loukas Karabarbounis
More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().