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Talent and Learning in Imperfect Markets

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Implications of talent resource allocation

A better understanding of the implications of institutions and policies that govern the discovery and allocation of talent resources is paramount for economic efficiency and income equality.

Industrial Technologies

Recent studies have revealed that the processes through which talent is discovered and revealed in the economy are lacking and coincide with problems in job training and education. An EU-funded project, TLIM (Talent and learning in imperfect markets), investigated how technological change has impacted the distribution of talent rents via its effect on the discovery/revelation process of talent. An empirical approach was used to study labour markets in terms of a broad measure of ability. This entailed the construction of a comprehensive data set that joined ability measures with educational choices, detailed labour market outcomes and family backgrounds. It was evident that there are personality traits that are consistently conducive to individual economic success and that they are as predictive as is intelligence and occupational selection. Additionally, what is known as a Flynn effect, a secular increase in intelligence test scores, was discovered. The personality traits that are positively related with mid-career earnings have been rising consistently across birth years. This increase is analogous in magnitude to the coinciding increase in intelligence. Results also showed significant trends in the allocation of ability in terms of sector. Sector choice was studied in a model where the agents encountered uncertain incomes with persistent risk. It is evident that the optimal behaviour of agents is affected by the presence of a borrowing limitation. On-the-job learning in a multisector model economy was studied and a new type of market and a new type of market inefficiency was identified. It is a bias towards too much turnover resulting in lower welfare and average productivity. These and other results of the study can have a positive impact on policy interventions.


Talent resource, resource allocation, economic efficiency, income equality, TLIM, labour markets

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