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Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?

Francois Gourio and Leena Rudanko

No WP-2014-2, Working Paper Series from Federal Reserve Bank of Chicago

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.

Keywords: Business cycle; capital; labor wedge (search for similar items in EconPapers)
JEL-codes: E13 E32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2014-01-15
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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