Intangibles, Inequality and Stagnation

47 Pages Posted: 23 Jan 2018

See all articles by Nobuhiro Kiyotaki

Nobuhiro Kiyotaki

Princeton University - Department of Economics

Shengxing Zhang

London School of Economics (LSE) - Department of Economics; Peking University HSBC Business School

Date Written: January 9, 2018

Abstract

We examine how aggregate output and income distribution interact with accumulation of intangible capital over time and across individuals. We consider an overlapping generations economy in which managerial skill (intangible capital) is essential for production, and it is acquired by young workers through on-the-job training by old managers. We show that, when young trainees are not committed to staying in the same firms and repaying their debt, a small difference in initial endowment and ability of young workers leads to a large inequality in accumulation of intangibles and lifetime income. A negative shock to endowment or the degree of commitment generates a persistent stagnation and a rise in inequality.

Suggested Citation

Kiyotaki, Nobuhiro and Zhang, Shengxing, Intangibles, Inequality and Stagnation (January 9, 2018). Available at SSRN: https://ssrn.com/abstract=3099125 or http://dx.doi.org/10.2139/ssrn.3099125

Nobuhiro Kiyotaki

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Shengxing Zhang (Contact Author)

London School of Economics (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://https://sites.google.com/site/oo7zsx/

Peking University HSBC Business School ( email )

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