The Allocation of Talent and U.S. Economic Growth

In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper measures the macroeconomic consequences of the remarkable convergence in the occupational distribution between 1960 and 2008 through the prism of a Roy model. We find that 15 to 20 percent of growth in aggregate output per worker over this period may be explained by the improved allocation of talent.

By Chang-Tai Hsieh, Erik Hurst, Charles I. Jones and Peter J. Klenow

http://faculty.chicagobooth.edu/erik.hurst/research/HHJK.pdf?utm_content=buffer6ae7c&utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer 

Trust and Manipulation in Social Networks

We investigate the role of manipulation in a model of opinion formation where agents have opinions about some common question of interest. Agents repeatedly communicate with their neighbors in the social network, can exert some effort to manipulate the trust of others, and update their opinions taking weighted averages of neighbors opinions. The incentives to manipulate are given by the agents preferences. We show that manipulation can modify the trust structure and lead to a connected society, and thus, make the society reaching a consensus. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. In sufficiently homophilic societies, manipulation accelerates (slows down) convergence if it decreases (increases) homophily. Finally, we investigate the tension between information aggregation and spread of misinformation. We
find that if the ability of the manipulating agent is weak and the agents underselling (overselling) their information gain (lose) overall influence, then manipulation reduces misinformation and agents converge jointly to more accurate opinions about some underlying true state.

Authors: Manuel Förster, Ana Mauleona, Vincent Vannetelboscha

http://halshs.archives-ouvertes.fr/docs/00/88/11/45/PDF/13065.pdf

Can Free Provision Reduce Demand for Public Services? Evidence from Kenyan Education

In 2003 Kenya abolished user fees in all government primary schools. Analysis of household survey data shows this policy contributed to a shift in demand away from free schools, where net enrollment stagnated after 2003, toward fee-charging private schools, where both enrollment and fee levels grew rapidly after 2003. These shifts had mixed distributional consequences. Enrollment by poorer households increased, but segregation between socio-economic groups also increased. The shift in demand toward private schooling was driven by more affluent households who (i) paid higher ex ante fees and thus experienced a larger reduction in school funding, and (ii) appear to have exited public schools partially in reaction to increased enrollment by poorer children. 

http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2013/11/04/000158349_20131104084625/Rendered/PDF/WPS6685.pdf

Authors: Tessa Bold, Mwangi Kimenyi, Germano Mwabu and Justin Sandefur