Misallocation of Entrepreneurial Talent in Postconflict Environments
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SourceJournal of Conflict Resolution, 57, 1, (2013), pp. 41-64
19 november 2012
Article / Letter to editor
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Financiële economie en ondernemingsfinanciering
Journal of Conflict Resolution
SubjectDistributional Conflicts in a Globalizing World: Consequences for State-Market-Civil Society Arrangements
Entrepreneurship is generally regarded as a productive force of change, innovation, and development in modern economies. Particularly for institutionally less developed environments, however, it has been argued that the same energy and talent can also be allocated to unproductive ends. In this article, we present a model that analyzes the allocation of entrepreneurial talent into productive activities and raiding in Postconflict environments, where most formal and informal institutions have broken down. We show that the distribution of initial wealth and entrepreneurial talent play a decisive role. Our analysis also suggests that microcredits can support the transition to a productive equilibrium, because they help to overcome credit constraints without creating incentives for raiding.
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