36 Pages Posted: 7 Jul 2017 Last revised: 14 May 2019
Date Written: April 1, 2019
We show how a technological shift to intangible capital can account for major economicand financial trends since 1980. Intangible investment requires the commitment of high-skill human capital, which is paid with deferred promises on future cashflows. As deferredhuman capital income is not tradeable, the amount of investable assets in the economyfalls. The general equilibrium effect is a gradual fall in interest rates and a re-allocation ofexcess savings into rising valuations of existing assets such as real estate. The concomitantrise in house prices and wage inequality leads to higher household leverage.
Keywords: Intangible capital, skill-biased technological change, mortgage credit, human capital, excess savings, house prices
JEL Classification: D33, E22, G32, J24
Suggested Citation: Suggested Citation