The Allocation of Talent and Financial Development, 1897 to 1936

40 Pages Posted: 8 Jun 2021 Last revised: 14 Jun 2021

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Chicheng Ma

The University of Hong Kong

Yuchen Sun

University of International Business and Economics (UIBE) - School of Banking and Finance

Yuchen Xu

Peking University HSBC Business School

Date Written: June 6, 2021

Abstract

We examine how the supply of talent affected financial development, based on a historical experiment that abruptly changed the allocation of talent in early 20th- century China. A millennium-long meritocratic institution, the imperial civil examination system had firmly linked Chinese intellectual and educational ambitions to government service. The abolition of this system in 1905, however, released the learned elites from the scholar-official system and they looked to modern industries for new opportunities of wealth and status. By analyzing the data of 281 prefectures between 1897 and 1936, we find that regions where there were more candidates for the civil examination produced more bankers and students of finance after 1905; this translated to a greater development of modern banks. From the aspect of the early development of modern finance, our findings coincide with Murphy, Shleifer and Vishny’s (1991) view on the growth implications of the allocation of talent to innovative industries.

Keywords: Allocation of Talent, Human Capital, Modern Banks, Financial Development, China, Civil Examination

JEL Classification: G21, N25, O43

Suggested Citation

Lin, Chen and Ma, Chicheng and Sun, Yuchen and Xu, Yuchen, The Allocation of Talent and Financial Development, 1897 to 1936 (June 6, 2021). Available at SSRN: https://ssrn.com/abstract=3861129 or http://dx.doi.org/10.2139/ssrn.3861129

Chen Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Chicheng Ma

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Yuchen Sun

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Yuchen Xu

Peking University HSBC Business School ( email )

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