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General-Purpose Technologies and Stock Market Bubbles

Author

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  • Tomohiro Hirano
  • Keiichi Kishi
  • Alexis Akira Toda

Abstract

We develop a macro-finance model linking stock price bubbles to a general-purpose technology (GPT), such as information technology and artificial intelligence. Knowledge spillovers differ across production factors, generating unbalanced growth and causing stock prices to outgrow dividends. Under our conditions, the unique equilibrium contains a bubble on dividend-paying stocks even though agents share common beliefs and rationally anticipate its collapse. The probability that spillovers persist affects the bubble's duration but not its existence. When spillovers equalize as the technology matures, the economy reaches balanced growth and the bubble collapses. Through IPO proceeds, the bubble can increase R\&D employment, while accumulated knowledge remains productive afterward. More broadly, balanced growth is a knife-edge property: the restrictions used to obtain it make stock prices and dividends grow at the same rate, thereby ruling out rational bubbles on dividend-paying assets by construction.

Suggested Citation

  • Tomohiro Hirano & Keiichi Kishi & Alexis Akira Toda, 2025. "General-Purpose Technologies and Stock Market Bubbles," Papers 2501.08215, arXiv.org, revised Aug 2026.
    • Handle: RePEc:arx:papers:2501.08215
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    References listed on IDEAS

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    Cited by:

    1. Tomohiro Hirano & Alexis Akira Toda, 2026. "Land, G versus R, and Infinite Debt Rollover," CIGS Working Paper Series 26-002E, The Canon Institute for Global Studies.

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