Tuesday 11
Political Economics and voting
Simona Fabrizi
› 9:30 - 10:00 (30min)
› 604
Institutions and the allocation of talent: cross-national and subnational evidence
Michael Alexeev * , Timur Natkhov  1, *@  , Leonid Polishchuk  2, *@  
1 : Brown University [Providence]  -  Website
Providence, Rhode Island 02912 -  United States
2 : Higher School of Economics, Moscow  (HSE)
* : Corresponding author

Strong institutions attract talent to productive activities, whereas weak ones raise the appeal of redistribution and rent-seeking. We propose a theory that develops conditions for the more talented individuals to be particularly sensitive in their career choices to the quality of institutions, and test the responsiveness of individuals' professional choices empirically. First, we use cross-country setting to show that the strength of institutions is positively associated with the share of college graduates with science degrees and negatively associated with the share of those with law degrees. Although these results hold in a variety of specifications, cross-country regressions may suffer from significant endogeneities. Also, college attendance may be a very crude indicator of talent. To alleviate these concerns we use a unique micro data set describing the choices of fields of studies by newly enrolled university students in Russian regions over 2011-2014. We show that the popularity of sciences and engineering among Russia's youth with higher ability as measured by the Unified State Examination scores increases in the quality of regional investment climate, whereas for law and public administration such link is negative. These findings reflect the gap between private and public returns to post-secondary education in Russia, and demonstrate that without improving institutions in the country, investments in human capital might not promote economic growth. More generally, our results put the link between institutional quality and the allocation of talent on a much firmer empirical footing than has been achieved in the literature so far.

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