On the matthew effect on individual investments in skills in arts, sports and science

Yury Yegorov, Franz Wirl, Dieter Grass, Markus Eigruber and Gustav Feichtinger

Journal of Economic Behavior & Organization, 2022, vol. 196, issue C, 178-199

Abstract: This paper describes the process of capital accumulation subject to the following characteristics: (i) convex returns to (human) capital and (ii) the need to self-finance investments. Our setup is applicable to some peculiarities in the arts, sports and science, inter alia, coined the Matthew effect in Merton (1968) and explains, e.g., why prominent researchers get disproportional credit for their work. The potential young artist’s (athlete’s or scientist’s) optimal strategies include quitting, or continuing and even expanding one’s human capital in the respective profession. Both outcomes are separated by a threshold level in human capital. In addition, we find that it can be optimal to stay in business although consumption falls and stays at the subsistence level forever (we call this outcome a Sisyphus point). This possibility is also interesting from a theoretical point-of-view, as the optimal control problem may turn abnormal, i.e., the objective does not enter the Hamiltonian.

Keywords: Human capital accumulation; Abnormal control problem; Convex returns; Threshold; Matthew effect; Sisyphus point (search for similar items in EconPapers)
JEL-codes: C61 E20 I24 I26 Z11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:196:y:2022:i:c:p:178-199

DOI: 10.1016/j.jebo.2022.02.008

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