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Misallocation of talent and human capital: Political economy analysis

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  • Gradstein, Mark

Abstract

Mismatches in the labor market, specifically because of underrepresentation of various population groups, carry significant economic cost. In this paper we argue, using a simple analytical model that an additional cost component is related to the effect of such underrepresentation on incentives to invest in human capital, which results in a mutual feedback relationship between the labor market and the skill acquisition market and may lead to economy's divergence. Further, it is shown that an initially advantaged group may have an incentive to minimize the bias against the disadvantaged group, and that political enfranchisement is the means to achieve a commitment to such a policy.

Suggested Citation

  • Gradstein, Mark, 2019. "Misallocation of talent and human capital: Political economy analysis," European Economic Review, Elsevier, vol. 118(C), pages 148-157.
    • Handle: RePEc:eee:eecrev:v:118:y:2019:i:c:p:148-157
    DOI: 10.1016/j.euroecorev.2019.05.010
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    Cited by:

    1. Almarina Gramozi & Theodore Palivos & Marios Zachariadis, 2020. "On the Degree and Consequences of Talent Misallocation for the United States," University of Cyprus Working Papers in Economics 09-2020, University of Cyprus Department of Economics.
    2. Mark Gradstein, 2022. "Cultural Attributes, Income Inequality, and Ethnic Differentials," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 44, pages 91-103, April.
    3. Almarina Gramozi & Theodore Palivos & Marios Zachariadis, 2023. "Measuring the welfare costs of racial discrimination in the labor market," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 232-252, April.
    4. Debora Di Gioacchino & Laura Sabani & Stefano Usai, 2022. "Intergenerational Upward (Im)mobility and Political Support of Public Education Spending," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(1), pages 49-76, March.

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    More about this item

    Keywords

    Talent mismatch; Group bias; Human capital; Political enfranchisement;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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