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Prediction Ability

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Author Info
Katsuya Takii (Osaka University)

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Abstract

This paper models the value of managerial human capital as a function of the ability to predict profitability in the presence of risk. The model implies that the marginal productivity of prediction ability increases with increasing risk and that managers with high prediction ability will tend to work in risky industries. This prediction contrasts with the traditional view that talented managers concentrate in large firms. Business School placement data supports this hypothesis; talented Business School graduates choose to work in risky industries. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(02)00009-1
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Publisher Info
Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 80-98
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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:80-98

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Related research
Keywords: manager; entrepreneur; human capital; risk; complementarity; assignment;

Other versions of this item:

Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups

References listed on IDEAS
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  5. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
  6. Katsuya Takii, 2000. "Risk and prediction ability," Economics Discussion Papers 517, University of Essex, Department of Economics.
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    Other versions:
  9. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Gretsky, Neil E. & Ostroy, Joseph M. & Zame, William R., 1999. "Perfect Competition in the Continuous Assignment Model," Journal of Economic Theory, Elsevier, vol. 88(1), pages 60-118, September. [Downloadable!] (restricted)
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    Other versions:
  12. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-94, April. [Downloadable!] (restricted)
  13. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn. [Downloadable!] (restricted)
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  15. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
  16. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June. [Downloadable!] (restricted)
  17. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June. [Downloadable!] (restricted)
  18. Katsuya Takii, 2000. "Prediction ability and investment under uncertainty," Economics Discussion Papers 518, University of Essex, Department of Economics.
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  19. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August. [Downloadable!] (restricted)
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    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Econometric Society 2004 North American Summer Meetings 320, Econometric Society. [Downloadable!]
    Other versions:
  2. Katsuya Takii, 2008. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms in a Rapidly Changing Environment," OSIPP Discussion Paper 08E003, Osaka School of International Public Policy, Osaka University. [Downloadable!]
  3. Katsuya Takii, 2007. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms," OSIPP Discussion Paper 07E002, Osaka School of International Public Policy, Osaka University. [Downloadable!]
    Other versions:
  4. Katsuya Takii, 2004. "Entrepreneurial Efficiency: An Empirical Framework and Evidence," Macroeconomics 0411006, EconWPA. [Downloadable!]
  5. Katsuya Takii, 2004. "Entrepreneurial Efficiency: Theory," Macroeconomics 0411005, EconWPA. [Downloadable!]
  6. Katsuya Takii, 2004. "Entrepreneurial Efficiency," Macroeconomics 0406007, EconWPA. [Downloadable!]
  7. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization 0406004, EconWPA. [Downloadable!]
  8. Li, Fei & Ueda, Masako, 2005. "CEO-Firm Match and Principal-Agent Problem," CEPR Discussion Papers 5119, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Katsuya Takii, 2009. "Entrepreneurial competition and its impact on the aggregate economy," Journal of Economics, Springer, vol. 97(1), pages 1-18, May. [Downloadable!] (restricted)
    Other versions:
  10. Katsuya Takii, 2004. "Prediction Ability and Investment under Uncertainty," Industrial Organization 0406005, EconWPA. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-24.

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