Institutions and the Allocation of Talent: Evidence from Russian Regions

Michael Alexeev (Indiana University)
Timur Natkhov (Higher School of Economics, Moscow)
Leonid Polishchuk (Higher School of Economics, Moscow)

Abstract : Strong institutions attract talent to productive activities, whereas weak ones raise the appeal of redistribution and rent-seeking. We propose a theory that describes the impact of institutions on occupational choices and shows that more talented individuals are particularly sensitive in their career choices to the quality of institutions. To test these predictions empirically, we use a unique micro data set describing the choices of fields of studies by newly enrolled university students in Russian regions in 2011-2014. We show that the popularity of sciences and engineering among Russia’s youth with higher ability as measured by the Unified State Examination scores increases in the quality of regional investment climate, whereas for law and public administration this relationship is negative. This confirms that investments in human capital reflect the quality of institutions, pointing to a mechanism connecting institutions to economic outcomes.

The Insight and the Legacy of `the Theory of Share Tenancy'

Douglas W. Allen (Simon Fraser University)
Dean Lueck (Indiana University)

Abstract : The Theory of Share Tenancy by Steven Cheung, first published as a PhD thesis 50 years ago, was an important watershed study on the economics of contracts. It contained the first formal demonstration of the Coase Theorem, linked the concepts of property rights and transaction costs, laid early foundations for the future economics of contracts, and can even lay claim to originating the idea of a risk/incentive tradeoff in contract design. This essay examines Cheung's key contributions in Share Tenancy, and considers reasons for its somewhat limited legacy outside of China.

The Legacy of Mexican Land and Water in California

Gary D. Libecap (University of California - Santa Barbara and NBER)
Dean Lueck (Indiana University)
Julio Ramos (Indiana University)

Abstract : We use a natural experiment to examine the effects of land demarcation on farms’ values in nineteenth-century California. Land demarcation occurs in two dominant forms: metes and bounds (MB) and the rectangular system (RS). In MB, individuals specify land parcels. In RS, land is surveyed and demarcated prior to settlement and is organized in a uniform grid of square plots. We use farm-level data from the 1880 Agricultural Census for California to test predictions about farms’ shape and economic outcomes in nineteenth-century California. Our results indicate that MB farmers had more valuable, and productive farms, and spent a greater amount of money on wages.