Capital adjustment costs

[jdebacker]

This issue is to discuss the best approach to add capital adjustment costs to the model.

One way to do this is to have firms own capital and households holding equity in these firms. This will change the firm FOC for capital and the interpretation of household savings. It will also change the market clearing conditions capital and savings (namely, the model will then have an asset clearing condition that total household savings equals the total value of firm equity).

[jdebacker]

A roadmap for this model enhancement:

• Write functions for adjustment costs and their derivatives
• (1) Write firm.get_LY_ratio analogous to the firm.get_KY_ratio function, but to solve for the labor output ratio rather than the capital output ratio
• (2) Write firm.solve_K analogous to the firm.solve_L function, but to solve for K from the production function given Y and L
• Update the firm.get_r function to include (the derivatives of) the adjustment cost function
• Update solution algorithm to put in place (1) and (2) and a computation of total adjustment costs by industry to pass to the resource constraint function (I suppose these are all paid in units of the numeraire industry output?)
• Write a function for dividends (= after tax cash flow of firm - need not be positive (negative is equity issuance))
• Update aggr.get_r_p to include dividends in place of rK
• Update docs to reflect these new functions and solution algorithm