NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?

Francois Gourio, Leena Rudanko

NBER Working Paper No. 19900
Issued in February 2014
NBER Program(s):   EFG   ME

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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Document Object Identifier (DOI): 10.3386/w19900

Published: Fran?ois Gourio & Leena Rudanko, 2014. "Can Intangible Capital Explain Cyclical Movements in the Labor Wedge?," American Economic Review, American Economic Association, vol. 104(5), pages 183-88, May. citation courtesy of

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