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Talent Allocation, Financial Intermediation and Growth: Evidence and Theory

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  • Khabibulina, Liliya
  • Hefti, Andreas

Abstract

In this paper we study the relationship between intersectoral wage inequality and economic growth. In the empirical part of the paper, we find a negative correlation of relative wages in the financial sector with respect to manufacturing sector with subsequent economic growth in case of the U.S. states from 1977 to 2011. We show that the result is robust to different standard estimation techniques and control variables. A similar while somewhat less robust result applies to the case of relative sector sizes as measured by the labor force. In the theoretical part we aim at constructing a tractable general equilibrium model of financial intermediation, entrepreneurship and growth with an imperfect labor market, that helps to explain the observed empirical regularities.

Suggested Citation

  • Khabibulina, Liliya & Hefti, Andreas, 2015. "Talent Allocation, Financial Intermediation and Growth: Evidence and Theory," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113095, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:113095
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    References listed on IDEAS

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    Cited by:

    1. Facundo Albornoz & Antonio Cabrales & Esther Hauk, 2019. "Occupational Choice with Endogenous Spillovers," The Economic Journal, Royal Economic Society, vol. 129(621), pages 1953-1970.

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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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