Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?
- (pp. 183-88)
AbstractIntangible 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.
Citation2014. "Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?." American Economic Review, 104(5): 183-88. DOI: 10.1257/aer.104.5.183
- D92 Intertemporal Firm Choice: Investment, Capacity, and Financing
- E13 General Aggregative Models: Neoclassical
- E22 Capital; Investment; Capacity
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E32 Business Fluctuations; Cycles