Secular Trends and Technological Progress

50 Pages Posted: 7 Jul 2017 Last revised: 23 Oct 2017

Robin Döttling

University of Amsterdam - Finance Group; Tinbergen Institute

Enrico C. Perotti

University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR); Tinbergen Institute

Multiple version iconThere are 2 versions of this paper

Date Written: June 30, 2017

Abstract

Technological progress enhancing the productivity of intangible capital can account for several long term financial trends since 1980. Critically, creating intangibles requires the commitment of human capital rather than physical investment, so firms need less external finance. In general equilibrium, a falling credit demand can explain reduced tangible investment along with falling interest rates. Excess savings boost asset valuations and flow to other assets such as real estate. Rising house prices combined with increasing wage inequality increase mortgage credit demand, household leverage and default risk. While demographics, trade and capital flows may have a strong impact on savings glut and factor productivity, only a major productivity shift to intangibles can account for all major trends, including rising income inequality.

Keywords: Intangible capital, skill-biased technological change, mortgage credit, human capital, excess savings, house prices

JEL Classification: D33, E22, G32, J24

Suggested Citation

Döttling, Robin and Perotti, Enrico C., Secular Trends and Technological Progress (June 30, 2017). Available at SSRN: https://ssrn.com/abstract=2996998 or http://dx.doi.org/10.2139/ssrn.2996998

Robin Döttling

University of Amsterdam - Finance Group ( email )

Roetersstraat 18
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Enrico C. Perotti (Contact Author)

University of Amsterdam - Finance Group ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands
+31 20 525 4159 (Phone)
+31 20 525 5285 (Fax)

HOME PAGE: http://www.fee.uva.nl/fm/people/pero.htm

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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