The Allocation of Talent and Financial Development, 1897 to 1936

Chen Lin (), Chicheng Ma (), Yuchen Sun () and Yuchen Xu ()
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Chen Lin: Faculty of Business and Economics, The University of Hong Kong, Hong Kong
Chicheng Ma: Faculty of Business and Economics, The University of Hong Kong, Hong Kong
Yuchen Sun: China School of Banking and Finance, University of International Business and Economics, Beijing 100029, China
Yuchen Xu: Business School, University of New South Wales, Kensington, New South Wales 2052, Australia

Management Science, 2025, vol. 71, issue 6, 4688-4706

Abstract: We examine how the supply of talent affected financial development based on an experiment that abruptly changed the allocation of talent in historical China. Under the meritocratic civil examination system, government service was the main employment for the Chinese intellectuals. The abolition of this system in 1905 reduced the status and wealth attached to government service, which led the intellectuals to turn to modern banking as a high-status sector of employment. We find that regions where there were more candidates for the civil examination produced more financial professionals after 1905, which translated to a greater development of modern banking.

Keywords: allocation of talent; human capital; modern banks; financial development; China; civil examination (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:6:p:4688-4706

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