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Entrepreneurial Competition and Its Impact on the Aggregate Economy

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Author Info
Katsuya Takii (Associate Professor, Osaka School of International Public Policy, Osaka University)

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Abstract

This paper models entrepreneurship as the entrepreneur's information processing activity in order to predict changes in demand and reallocate resources. The results show that allocative efficiency---and therefore aggregate productivity---increases through intensified competition by entrepreneurs grasping at opportunities. This fierce competition leads to price reductions that result in the improvement of measured aggregate productivity. The price reduction also forces relatively less able entrepreneurs to become workers. As resources are then dealt with only by relatively talented entrepreneurs, this selection effect also increases aggregate productivity. The paper also discusses how the selection effect influences the distribution of firm size.

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File URL: http://www.osipp.osaka-u.ac.jp/archives/DP/2008/DP2008E010.pdf
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Publisher Info
Paper provided by Osaka School of International Public Policy, Osaka University in its series OSIPP Discussion Paper with number 08E010.

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Length: 25 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:osp:wpaper:08e010

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Web page: http://www.osipp.osaka-u.ac.jp/
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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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References listed on IDEAS
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. Mills, David E & Schumann, Laurence, 1985. "Industry Structure with Fluctuating Demand," American Economic Review, American Economic Association, vol. 75(4), pages 758-67, September. [Downloadable!] (restricted)
  2. Casson, Mark, 2005. "Entrepreneurship and the theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 327-348, October. [Downloadable!] (restricted)
  3. Katsuya Takii, 2004. "Entrepreneurial Efficiency: Theory," Macroeconomics 0411005, EconWPA. [Downloadable!]
  4. Takii, Katsuya, 2008. "Fiscal policy and entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 592-608, March. [Downloadable!] (restricted)
    Other versions:
  5. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January. [Downloadable!] (restricted)
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  6. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction And Firm Organization Choice," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1201-1237, November. [Downloadable!] (restricted)
  7. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March. [Downloadable!] (restricted)
  8. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-46, September. [Downloadable!] (restricted)
  9. Welch, F, 1970. "Education in Production," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 35-59, Jan.-Feb.. [Downloadable!] (restricted)
  10. Fiet, James O, 1996. " The Informational Basis of Entrepreneurial Discovery," Small Business Economics, Springer, vol. 8(6), pages 419-30, December.
  11. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization 0406004, EconWPA. [Downloadable!]
  12. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
  13. Marcus Asplund & Volker Nocke, 2006. "Firm Turnover in Imperfectly Competitive Markets-super-1," Review of Economic Studies, Blackwell Publishing, vol. 73(2), pages 295-327, 04. [Downloadable!] (restricted)
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This page was last updated on 2009-11-25.

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