Entrepreneurial Efficiency: Theory

Katsuya Takii

Macroeconomics from EconWPA

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.

Keywords: entrepreneurship; prediction ability; total factor productivity; allocative efficiency; aggregate production function. (search for similar items in EconPapers)
JEL-codes: D21 D61 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent
Date: Written 2004-11-10
Note: Type of Document - pdf
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http://129.3.20.41/eps/mac/papers/0411/0411005.pdf (application/pdf)

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