DP13984 Redistributive Growth

Author(s): Robin Döttling, Enrico C Perotti
Publication Date: September 2019
Date Revised: September 2019
Keyword(s): excess savings, Human Capital, Intangible Capital, knowledge based technological change, mortgage credit, skill premium
JEL(s): D33, E22, G32, J24
Programme Areas: Financial Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13984

We study long term effects of the technological shift to intangible capital, whose creation relies on the commitment of skilled human capital in firm production. Humancapital cannot be owned, so firms need less financing. Human capital cannot be credibly committed so firms need to reward it by deferred compensation, diluting future profits. As human capital income is not tradeable, total investable assets fall. The general equilibrium effect is a gradual fall in interest rates and a re-allocation of excess savings into rising valuations of existing assets such as real estate. The concomitant rise in house prices and wage inequality leads to higher household leverage.