Measuring Factor Adjustment Costs

Factor adjustment costs: A structural investigation

This paper assesses various capital and labor adjustment costs functions estimating a general equilibrium framework with Bayesian methods using US aggregate data. The estimation finds that the adjustment costs are convex in both capital and labor and allowing for their joint interaction is important. The structural model enables us to identify the response of factor adjustment costs to exogenou...

Indeterminacy and Investment Adjustment Costs

It has been widely known that neoclassical growth models with su¢cient increasing returns in production may feature indeterminacy. This note shows that investment adjustment costs increase the required degree of increasing returns for indeterminacy to arise. Under empirically plausible levels of investment adjustment costs, we need implausibly large degree of increasing returns to generate inde...

Adjustment Costs from Environmental Change

The paper is concerned with the case whereby the distribution of a firm’s productivity shocks changes without the knowledge of the firm. Over time the firm learns about the nature and extent of the change in the distribution of the shock and adjusts, incurring adjustment costs in the process. The long run loss in profits (±) due to the shift in the distribution we term the equilibrium response....

Indirect Adjustment-costs under Alternative Coordination Regimes

Villas-Boas, and seminar participants at MIT. Of course, the usual disclaimer applies. Abstract The paper is a study of barriers to coordination in terms of agents' incentives to search for and communicate complementary information. In particular, I look at the value of commitment by comparing game forms in which a contract is negotiated prior to, versus after, search and communication. The com...

Adjustment Costs and the Flexible Accelerator