Education and the Allocation of Talent

38 Pages Posted: 16 Oct 2001

See all articles by Hans K. Hvide

Hans K. Hvide

University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)


The purpose of this paper is to study how education shapes the allocation of talent. To model the link between education and the allocation of talent, we add two features to a Spence (1974) type of two-sector education model. First, performance contracts give a worker incentives to choose the sector where (she believes she is) most productive. Second, education increases a worker's information capital, through giving the worker information about her abilities, and hence may affect the desired sector or job to work in. The baseline model predicts that workers with average ability educate, while the most able skip education. In an extension, we compare the UK and the US Bachelor's degrees and, moreover, analyze hybrid educational systems, common in Europe, that offer both UK and US types of Bachelor's degrees.

Keywords: Allocation of Talent, Career Concerns, Contracts, Education, Human Capital, Information Capital, Self-Awareness, Self-Confidence, Signaling

JEL Classification: D82, I2, J3

Suggested Citation

Hvide, Hans, Education and the Allocation of Talent. Available at SSRN: or

Hans Hvide (Contact Author)

University of Bergen - Department of Economics ( email )

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University of Aberdeen - Business School ( email )

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Aberdeen, Scotland AB24 3QY
United Kingdom


Centre for Economic Policy Research (CEPR)

United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072

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