Welfare Effects of the Allocation of Talent to Financial Trading: What Does the Grossman-Stiglitz Model Say?

Lutz G. Arnold and Sebastian Zelzner

No 190, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: This paper investigates the implications of the Grossman-Stiglitz (1980) model on the informational eficiency of financial markets for the optimality of the allocation of talent to financial trading versus entrepreneurship. Informed traders make the financial market more informationally eficient, entrepreneurs create output and jobs. The model indicates that financial trading attracts too much, rather than too little, talent.

Keywords: : market eficiency; asymmetric information; allocation of talent; occupational choice (search for similar items in EconPapers)
JEL-codes: G14 J24 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020-02
New Economics Papers: this item is included in nep-ent and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:bav:wpaper:190_arnold_zelzner

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