Abstract :
Purelytechnologicalfactorscanbeafundamentalforcebehindtheemergenceofasset
price bubblesindevelopedeconomies.Weanalyzeaneconomyinwhichtheproduc-
tion technologyutilizesbothphysicalandintangiblecapital,wherethelattercannot
be usedascollateralforborrowing.Technologicalchange,intheformofincreased
importanceofintangiblecapitalinproduction,sharpenstheborrowingconstraintsof
entrepreneurs,leadingtoascarcityofhigh-yieldassetsrelativetolow-yieldones.This
can createtheconditionsforassetbubbles.Additionally,duetothefinancialfrictions,
standarddynamicefficiencytestsarenotvalid,andbubblesarenotParetoimproving
