Document Type
Article
Abstract
We examine the economy-wide degree of substitutability between intangible capital and other factor inputs in production using a large sample of advanced countries. In this context, we turn to studying the implications of intangible and tangible capital growth for labor income share dynamics. Compared to tangible capital, we find that intangible capital more strongly complements skilled labor. The analysis further indicates relative fungibility between tangible capital and a composite of intangible capital and skilled labor, in line with the rising prominence of knowledge-intensive tasks and AI-driven online platforms. The intrinsic nature of intangibles and their asymmetric effects across skilled and unskilled labor productivity based on our substitution elasticities suggest that intangible capital growth increases income inequality more aggressively.
DOI
10.1111/roiw.12727
Recommended Citation
Velic, A. (2025). Factor Substitution Possibilities, Labor Share Dynamics, and Inequality in an Age of Intangibles. Review of Income and Wealth, 71(1), Article e12727. https://doi.org/10.1111/roiw.12727
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Publication Details
https://doi.org/10.1111/roiw.12727