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Will the superstar companies and Amazon effects reshape the economy?



For example, investments in modern enterprises tend to be made in the form of intangible capital such as software and patents rather than machines and other physical goods. That may be one reason why central banks' low interest rate policy has not led to more investment in the last decade, said Nicolas Crouzet and Janice Eberly of Northwestern University in a paper presented at the conference.

Banks are generally averse to intellectual property or other intangibles as collateral for loans, which could mean interest rate cuts by a central bank, have less power to generate higher capital expenditures.

Alan Krueger, an economist from Princeton, argued that the monopsony power is most likely part of the apparent puzzle of why wage growth is low. According to his estimates, wages are expected to rise by 1

to 1.5 percentage points faster than before given recent inflation and unemployment rates.

If workers have only a few potential employers to choose from, they may be able to charge less for higher wages, and it will be easier for employers to limit wages, whether through explicit arrangements in the back room or through more subtle signaling.

But he said monetary policy could do something to reduce this effect. Finally, by keeping interest rates low and strengthening the labor market, employers will find that they have no choice but to increase workers' wages. "Allowing the labor market to get hotter than usual could lead to a collapse," Krueger said. "If the agreements abate, wages and employment would rise."

Another study by Harvard economist Alberto Cavallo provides evidence that the algorithms used by Amazon and other online retailers, with their ever-changing prices, may cause greater fluctuations in headline inflation in the event of currency or other shocks ,

Physical retailers tend to be slow to change prices due to temporary disruptions, such as a dollar increase or a drop in gasoline prices. However, online retailers are able to account for price changes almost immediately.


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