%0 Report
        %A Chetty, V. K.
%A Heckman, James J.
        %T Internal Adjustment Costs of Firm-Specific Factors and the Neoclassical Theory of the Firm
        %D 2022
        %8 2022 Nov
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 15744
        %U https://www.iza.org/index.php/publications/dp15744
        %X 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.
        %K firm-specific capital
%K frontier production theory
%K factor demand
%K adjustment costs