Does the Cream Always Rise to the Top? The Misallocation of Talent in Innovation

Murat Celik

Journal of Monetary Economics, 2023, vol. 133, issue C, 105-128

Abstract: The misallocation of talent in innovation – “missing Einsteins” – has a first-order impact on growth and welfare. Surname-level empirical analysis combining inventor and census micro-data reveals people from richer backgrounds are more likely to become inventors, but those from high-education backgrounds become more prolific inventors. Motivated by this discrepancy, an endogenous growth model with financial frictions on the household side is developed. Individuals compete for scarce inventor training. The rich can become inventors even if mediocre through excessive credentialing spending. Shutting down credentialing spending raises innovation, growth, welfare, and inequality. Optimal progressive bequest taxes increase growth and welfare, but reduce inequality.

Keywords: economic growth; inequality; innovation; inventors; misallocation (search for similar items in EconPapers)
JEL-codes: O15 O31 O41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:133:y:2023:i:c:p:105-128

DOI: 10.1016/j.jmoneco.2022.11.003

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