distinguish between three adjustment mechanisms: through factor prices, through an expansion in the size of those production units … supply shocks do not induce factor price changes in the tradable sector. In this sector, most of the adjustment to changes in … exit the market are an important additional channel of adjustment. Finally, we demonstrate that an industry level analysis …

necessarily associated with large adjustment costs. Indeed, extrinsic rigidity appears to be significant in many cases. We also … find that asymmetry in the price adjustment could be due to trends in marginal costs and/or desired mark-ups rather than … asymmetric cost of adjustment bands …