Discussion of “Reallocating and Pricing Illiquid Capital: Two Productive Trees”

This discussion of “Reallocating and Pricing Illiquid Capital: Two Productive Trees” by Janice Eberly and Neng Wanghighlights its tractable two‐sector model with costly capital reallocation, which links diversification benefits, adjustment frictions, and asset pricing. I outline four promising directions for future research: quantifying the diversification–friction trade‐off, exploring business cycle and asset pricing dynamics, examining growth under uncertainty, and connecting to the capital reallocation literature with state‐dependent frictions. The model framework provides a clear and versatile framework that can guide both theoretical advances and empirical work on capital allocation, risk premia, and macro‐financial dynamics.