Barnow, Trutko, and Piatak focus on whether persistent occupation-specific labor shortages might lead to inefficiencies in the U.S. economy. They describe why shortages arise, the difficulty in ascertaining that a shortage is present, and how to assess strategies to alleviate the shortage.

We show that adjustment cost models with labor supply can explain both asset returns and business cycle facts when adjustment costs penalize the changes of investment. This conclusion stands in contrast to results obtained in the literature with adjustment costs that penalize the changes of capital.