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Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?

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  • Gourio, Francois

    (Federal Reserve Bank of Chicago)

  • Rudanko, Leena

    ()
    (Boston University)

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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-2014-2.

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Length: 20 pages
Date of creation: 15 Jan 2014
Date of revision:
Handle: RePEc:fip:fedhwp:wp-2014-02

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Keywords: Business cycle; capital; labor wedge;

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References

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  1. Hall, Robert E, 1997. "Macroeconomic Fluctuations and the Allocation of Time," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S223-50, January.
  2. Ellen R. McGrattan & Edward C. Prescott, 2007. "Unmeasured Investment and the Puzzling U.S. Boom in the 1990s," NBER Working Papers 13499, National Bureau of Economic Research, Inc.
  3. Robert Shimer, 2009. "Convergence in Macroeconomics: The Labor Wedge," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 280-97, January.
  4. Francois Gourio & Leena Rudanko, 2011. "Customer Capital," NBER Working Papers 17191, National Bureau of Economic Research, Inc.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?
    by Christian Zimmermann in NEP-DGE blog on 2014-03-05 16:15:32

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