The Rise of Intangible Capital and the Macroeconomic Implications

Andrea Chiavari and Sampreet Singh Goraya

No 1078, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We document a technological change in production technology biased towards intangible capital, such as computerized information and software, over other inputs in the last three decades. This has led to higher investment adjustment costs for firms. A general equilibrium firm dynamics model suggests that this can result in (i) increased firm size and concentration, (ii) changes in aggregate factor shares, and (iii) rise in dispersion of total factor productivity revenue coupled with declining aggregate productivity. This paper provides an alternative mechanism behind these macroeconomic changes in the US economy, emphasizing the efficient response of firms to changes in production technology.

Date: 2025-04-08
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