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Institutions and the Allocation of Talent

Author

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  • Natkhov Timur

    () (National Research University Higher School of Economics. Center for Institutional Studies)

  • Polishchuk Leonid

    () (National Research University Higher School of Economics. Center for Institutional Studies)

Abstract

Institutions affect investment decisions, including investments in human capital. Hence institutions are relevant for the allocation of talent. Good market-supporting institutions attract talent to productive value-creating activities, whereas poor ones raise the appeal of rent-seeking. We propose a theoretical model that predicts that more talented individuals are particularly sensitive in their career choices to the quality of institutions, and test these predictions on a sample of around 95 countries of the world. We find a strong positive association between the quality of institutions and graduation of college and university students in science, and an even stronger negative correlation with graduation in law. Our findings are robust to various specifications of empirical models, including smaller samples of former colonies and transition countries. The quality of human capital makes the distinction between educational choices under strong and weak institutions particularly sharp. We show that the allocation of talent is an important link between institutions and growth.

Suggested Citation

  • Natkhov Timur & Polishchuk Leonid, 2012. "Institutions and the Allocation of Talent," HSE Working papers WP BRP 15/EC/2012, National Research University Higher School of Economics.
  • Handle: RePEc:hig:wpaper:15/ec/2012
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Okey K. N. Mawussé, 2013. "Institutions and scientific research in Africa," Economics Bulletin, AccessEcon, vol. 33(2), pages 1487-1503.
    2. Nifo, Annamaria & Scalera, Domenico & Vecchione, Gaetano, 2016. "What do you want to be when you grow up? Local institutional quality and the choice of the fields of study in Italy (2004-2007)," MPRA Paper 69907, University Library of Munich, Germany.
    3. Thorvaldur Gylfason, 2014. "Iceland: How Could This Happen?," CESifo Working Paper Series 4605, CESifo Group Munich.

    More about this item

    Keywords

    institutions; allocation of talent; rent-seeking; economic growth;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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