Pelikan, Pavel (The Research Institute of Industrial Economics)
Abstract
The search for growth-promoting policies is found to demand knowledge of how growth depends upon actions of entrepreneurs and how these actions depend upon the prevailing institutions. While institutions have extensively been examined for their influences upon the freedoms and the incentives of entrepreneurs, and thereby upon the level of employment of resources, this paper examines their influences upon the selection of entrepreneurs, and thereby upon the efficiency of that employment. This selection is crucial in the realistic but in theory seldom considered cases in which all agents, including entrepreneurs, may differ in economic abilities. A simple model shows that in the long run, selection by market competition, especially when extended to financial markets, vastly outperforms selection controlled or protected politically. Such selection may outperform market selection only during a limited period, extendable only at the price of growing bad debts and financial crises.
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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
510.
Length: 43 pages Date of creation: 30 Jan 1999 Date of revision:
15 Feb 2000 Handle: RePEc:hhs:iuiwop:0510
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden Phone: +46 8 665 4500 Fax: +46 8 665 4599 Email: Web page: http://www.ifn.se/ More information through EDIRC
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