In this paper we develop a model to describe a firm’s demand for two production factors which is subject to the presence of nonconvex adjustment costs. In our model simultaneous adjustment of these two production factors may either increase or decrease the total costs incurred by the firm. The...

A structural model is developed and estimated by a maximum likelihood routine to investigate interrelated factor demand subject to nonconvex adjustment costs. The dataset concerns Norwegian plants operating in manufacturing industries and it covers the period 1993-2005. The estimates indicate...