Entrepreneurial Risks
What exactly is the impact of uncertainty on firms’ decisions and market outcomes? This is the current focus of Vivek Ghosal’s research. In a recent CESifo Working Paper (No. 4312), he uses asymmetric-information and real-options theories to construct alternative measures of uncertainty based on a survey of professional forecasters and an estimation of regression-based forecasting models for GDP growth, inflation, the S&P 500 stock price index and fuel prices. The results indicate that greater uncertainty has a negative impact on growth of employment and the number of businesses, and the effects appear to be primarily felt by relatively smaller businesses. The impact on large businesses is generally non-existent or weaker. Thus, we need too focus on the relatively smaller and entrepreneurial businesses to truly understand the effects of uncertainty on firms’ decisions.
In addition to firms’ decision-making under uncertainty, Mr Ghosal’s research and policy interests include: 1) antitrust/competition laws and enforcement, 2) firm strategy related to innovation, M&As and pricing, 3) impact of environmental regulations on business strategy, innovation and firm reorganization, and 4) regulatory reform to enhance competition and innovation.
During his visit to CESifo, Mr Ghosal will examine research questions revolving around decisions under uncertainty using German macroeconomic and microeconomic datasets. In addition, he is interested in conducting a comparative analysis between US and German experience in a possible collaboration with Ifo researchers.
Mr Ghosal is Professor at the School of Economics of the Georgia Institute of Technology. He holds an MA in Economics from the Delhi School of Economics and a PhD in Economics from the Warrington College of Business at the University of Florida. He has published in the Review of Economics and Statistics, Journal of Industrial Economics, Economic Inquiry, Review of Industrial Organization and Economics Letters, among others.