at 10.30
Leonid Polishchuk (HSE, Moscow): Institutions and the allocation of talent

Timur Natkhov and Leonid Polishchuk: Institutions and the allocation of talent

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.

JEL classification: D02, I25, J24, O43
Key words: institutions, allocation of talent, rent-seeking, economic growth

BOFIT seminars
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms Liisa Mannila  (firstname.lastname@bof.fi, phone  + 358 10 831 2268).

Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).