Working Paper No. 480

Allocation of Economic Competence in Teams: A Comparative Institutional Analysis

Published: May 1997Pages: 54Keywords: Economic competence, human capital, bounded rationality, institutions, entrepreneurs, investors, government, market selection, financial markets, industrial policiesJEL-codes: D20; D92; H10; L52; O40; P51

Allocation of Economic Competence in Teams: A Comparative Institutional Analysis Pavel Pelikan


Attention is called to a little explored scarce resource, named 'economic competence', which combines features of human capital and bounded rationality, and can be defined as the non-transferable ('tacit') abilities of economic agents to employ transferable information for deciding about the use of scarce resources, including economic competence itself. An economy's performance is shown to strongly depend on how this resource i allocated, which in turn strongly depends upon the economy's institutions ('rules of the game'). Three stylized institutional alternatives are compared for their short-term and long-term effects upon the output and growth of a perfect team economy. The results throw new light on the social value of financial markets and the limitations of industrial policies.

Elgar Companion to

Social Capital and Health

Martin Ljunge okt 2018.jpg

Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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