Internal Adjustment Costs of Firm-Specific Factors and the Neoclassical Theory of the Firm

V.K. Chetty and James Heckman

No 30695, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper considers the consequences of a two-sector vertically-integrated model of firms producing output using firm-specific capital with a second sector producing firm-specific capital by adapting raw capital purchased in the market. Analysts rarely observe each sector separately. Aggregating over both sectors produces short-run and long-run factor demand functions that appear to be perverse, but when disaggregated obey standard neoclassical properties. Adjustment costs create the appearance of static inefficiency in the presence of dynamic efficiency.

JEL-codes: D21 E13 L11 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-eff and nep-ind
Note: IO TWP
References: Add references at CitEc
Citations:

Published as V. K. Chetty & James J. Heckman, 2023. "Internal adjustment costs of firm-specific factors and the neoclassical theory of the firm," Empirical Economics, vol 64(6), pages 2703-2719.

Downloads: (external link)
http://www.nber.org/papers/w30695.pdf (application/pdf)

Related works:
Journal Article: Internal adjustment costs of firm-specific factors and the neoclassical theory of the firm (2023)
Working Paper: Internal Adjustment Costs of Firm-Specific Factors and the Neoclassical Theory of the Firm (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:30695

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30695

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().