The Allocation of Talent: Implicationsfor Growth
AbstractA country's most talented people typically organize production by others, so they can spread their ability advantage over a larger scale. When the start firms, they innovate and foster growth, but when they become rent seekers, they only redistribute wealth and reduce growth. Occupational choice depends on returns to ability and to scale in each sector, on market size, and on compensation contracts. In most countries, rent seeking rewards talent more than entrepreneurship does, leading to stagnation. Our evidence shows that countries with a higher proportion of engineering college majors grows faster; whereas countries with a higher proportion of law concentrators grows more slowly. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Date of creation: 1990
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