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Entrepreneurial Efficiency: Theory

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  • Katsuya Takii

    (Osaka School of International Public Policy, Osaka University)

Abstract

This paper models firms' entrepreneurial ability according to their ability to predict changes in productivity (i.e., their prediction ability), and derives an aggregate production function as a result of entrepreneurship. An increase in firms' prediction ability improves allocative efficiency in a competitive economy, but can reduce it when opportunities are distorted. It is shown that prediction ability can aggravate distortions in the presence of political risk. Because efficiency affects the total factor productivity (TFP) of an economy, the model can explain how entrepreneurship influences TFP.

Suggested Citation

  • Katsuya Takii, 2004. "Entrepreneurial Efficiency: Theory," Macroeconomics 0411005, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0411005 Note: Type of Document - pdf
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    References listed on IDEAS

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    1. Holmes, Thomas J. & Jr., James A. Schmitz, 2001. "A gain from trade: From unproductive to productive entrepreneurship," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 417-446, April.
    2. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    3. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, pages 569-594.
    4. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    5. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, pages 561-574.
    6. Katsuya Takii, 2011. "Entrepreneurial Efficiency: Theory," The Japanese Economic Review, Japanese Economic Association, pages 196-214.
    7. Robert E. Hall & Charles I. Jones, 1998. "Why Do Some Countries Produce So Much More Output per Worker than Others?"," Working Papers 98007, Stanford University, Department of Economics.
    8. 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 265-294, April.
    9. Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
    10. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    11. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, pages 3-22.
    12. Katsuya Takii, 2003. "Prediction Ability," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 80-98, January.
    13. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, pages 827-846.
    14. Katsuya Takii, 2004. "Entrepreneurial Efficiency," Macroeconomics 0406007, EconWPA.
    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.
    16. Eckwert, Bernhard & Zilcha, Itzhak, 2001. "The Value of Information in Production Economies," Journal of Economic Theory, Elsevier, vol. 100(1), pages 172-186, September.
    17. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, pages 569-594.
    18. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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    Citations

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    Cited by:

    1. Katsuya Takii, 2011. "Entrepreneurial Efficiency: Theory," The Japanese Economic Review, Japanese Economic Association, pages 196-214.
    2. Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Econometric Society 2004 Far Eastern Meetings 698, Econometric Society.
    3. Takii, Katsuya, 2008. "Fiscal policy and entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, pages 592-608.
    4. Katsuya Takii, 2009. "Entrepreneurial competition and its impact on the aggregate economy," Journal of Economics, Springer, pages 1-18.

    More about this item

    Keywords

    entrepreneurship; prediction ability; total factor productivity; allocative efficiency; aggregate production function.;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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