Intangible investments and international business

Authors: Guido Baldi André Bodmer

Publish Date: 2016/04/02

Volume: 14, Issue: 2, Pages: 211-219

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Abstract

Intangible capital is an increasingly important factor of production in advanced economies Governments in Europe and elsewhere promote investment in intangible assets However the potential role of intangibles for business cycles and the international transmission of shocks is not well understood In this paper we investigate the international business cycle effects of intangible capital To this aim we build an otherwise standard twocountry real business cycle model augmented by a production sector for intangibles and allow for the nonrivalrous use of intangible capital in the production of final output goods and new intangibles We find that a model including intangibles is associated with international comovement of tangible investment which is a feature observed in the data that many models fail to produceWe thank the anonymous referees for useful comments and suggestions In addition comments by various seminar participants are gratefully acknowledged All remaining errors are the responsibility of the authors The views expressed in this paper are those of the authors and not necessarily those of the institutions to which the authors are affiliated

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