Entrepreneurial Competition and Its Impact on the Aggregate Economy

Katsuya Takii

No 08E010, OSIPP Discussion Paper from Osaka School of International Public Policy, Osaka University

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.

JEL-codes: D21 D61 D83 L25 L26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-ent and nep-mic
Date: 2008-09
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Related works:
Journal Article: Entrepreneurial competition and its impact on the aggregate economy (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:osp:wpaper:08e010

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