Jorgenson's 1963 paper, “Capital Theory and Investment Behavior,” introduced all the important features of the cost of capital employed in the subsequent literature. His principal innovations were the derivation of investment demand from a model of capital as a factor of production, the incorporation of the tax treatment of income from capital into the price of capital input, and econometric modeling of gestation lags in the investment process.
Jorgenson's 1963 paper, “Capital Theory and Investment Behavior,” detailed all critical features of the cost of capital that were later adopted in academic literature. His major contributions involved deriving investment demand from a model of capital as an input factor, incorporating tax considerations into the valuation of capital inputs, and using econometric methods to analyze investment lags.