Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/95200 
Authors: 
Year of Publication: 
1999
Series/Report no.: 
IUI Working Paper No. 510
Publisher: 
The Research Institute of Industrial Economics (IUI), Stockholm
Abstract: 
The search for growth-promoting policies is found to demand knowledge of how growth depends upon actions of entrepreneurs and how these actions depend upon the prevailing institutions. While institutions have extensively been examined for their influences upon the freedoms and the incentives of entrepreneurs, and thereby upon the level of employment of resources, this paper examines their influences upon the selection of entrepreneurs, and thereby upon the efficiency of that employment. This selection is crucial in the realistic but in theory seldom considered cases in which all agents, including entrepreneurs, may differ in economic abilities. A simple model shows that in the long run, selection by market competition, especially when extended to financial markets, vastly outperforms selection controlled or protected politically. Such selection may outperform market selection only during a limited period, extendable only at the price of growing bad debts and financial crises.
Subjects: 
Eonomic growth
growth-promoting policies
institutions
economic abilities
entrepreneurs
investors
voters
market selection
government selection
financial markets
financial crises
JEL: 
D90
E44
G10
O10
O40
P51
Document Type: 
Working Paper

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