@techreport{NBERw5471,
 title = "The "Fundamental Transformation" in Macroeconomics",
 author = "Ricardo J. Caballero and Mohamad L. Hammour",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "5471",
 year = "1996",
 month = "February",
 URL = "http://www.nber.org/papers/w5471",
 abstract = {When factors enter into joint-production, they typically develop a degree of specificity with respect to each other.  It is well known that, when combined with contracting difficulties, specificity gives rise to a Williamsonian 'Fundamental Transformation' from an ex-ante competitive relationship to an ex-post bilateral monopoly.  The macroeconomic consequences of widespread specificity are far-reaching. Specificity results in misallocation, underutilization, and unemployment of the economy's productive factors; it hampers growth by depressing the incentives to replace what is outdated and to fully utilize the economy's resources; it disrupts macroeconomic adjustment by inducing a wedge between timid creation and excessive destruction of the old system; and it exacerbates downturns by `elastifying' the cyclical response of inelastic factors.},
}