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Entrepreneurial competition and its impact on the aggregate economy

  • Katsuya Takii

    ()

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://hdl.handle.net/10.1007/s00712-008-0056-5
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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 97 (2009)
Issue (Month): 1 (May)
Pages: 1-18

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Handle: RePEc:kap:jeczfn:v:97:y:2009:i:1:p:1-18
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=108909

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  1. Welch, F, 1970. "Education in Production," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 35-59, Jan.-Feb..
  2. Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Econometric Society 2004 Far Eastern Meetings 698, Econometric Society.
  3. 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.
  4. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
  5. Marcus Asplund & Volker Nocke, 2006. "Firm Turnover in Imperfectly Competitive Markets -super-1," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 295-327.
  6. Schumpeter, Joseph A., 1947. "The Creative Response in Economic History," The Journal of Economic History, Cambridge University Press, vol. 7(02), pages 149-159, November.
  7. Casson, Mark, 2005. "Entrepreneurship and the theory of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 327-348, October.
  8. Marcus Asplund & Volker Nocke, 2003. "Firm Turnover in Imperfectly Competitive Markets," PIER Working Paper Archive 03-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. 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.
  10. 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.
  11. Katsuya Takii, 2011. "Entrepreneurial Efficiency: Theory," The Japanese Economic Review, Japanese Economic Association, vol. 62(2), pages 196-214, 06.
  12. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  13. Mills, David E & Schumann, Laurence, 1985. "Industry Structure with Fluctuating Demand," American Economic Review, American Economic Association, vol. 75(4), pages 758-67, September.
  14. Jose V. Rodriguez Mora & John Hassler, 2000. "Intelligence, Social Mobility, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 888-908, September.
  15. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization 0406004, EconWPA.
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