Adjustment Costs

TL;DR: This article defined investment as the act of incurring an immediate cost in the expectation of future rewards, i.e., the payments it must make to extract itself from contractual commitments, including severance payments to labor, are the initial expenditure, and the prospective reward is the reduction in future losses.

TL;DR: In this paper, the optimal rate of investment as a function of marginal q adjusted for tax parameters is derived from data on average q assuming the actual U.S. tax system concerning corporate tax rate and depreciation allowances.

TL;DR: In this paper, a model of firms' optimal employment policies under linear adjustment costs is proposed, and it is shown that firing costs have a larger effect on firms' propensity to fire than to hire, and (slightly) increase average long run employment.

TL;DR: The authors found that a tax on job destruction at the firm level has a sizable negative impact on total employment: a tax equal to 1 year's wages reduces employment by roughly 2.5 percent.