Working Paper: NBER ID: w19900
Authors: Francois Gourio; Leena Rudanko
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.
Keywords: Intangible Capital; Labor Wedge; Business Cycle Dynamics; Customer Capital
JEL Codes: E13; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| customer capital (G31) | labor wedge (J39) |
| selling effort (M31) | labor dynamics (J89) |
| labor dynamics (J89) | labor wedge (J39) |
| selling effort (M31) | business cycle dynamics (E32) |
| customer capital (G31) | cyclical behavior of labor wedge (J29) |