Economics of Talent: Dynamics and Multiplicity of Equilibria

Abstract

This paper models dynamic interactions between talent and its market. The economics of art and science di ers from other branches, by the small role of material inputs and the large role of market ac- cessibility. E.g., an author requires access to (potential) readers as a complement to his productive capital. We study the problem of op- timal investments into two stocks: productive capital and access (or bargaining power) that determines how much of the revenues can be accrued. It is shown that there exists a multiplicity of equilibria (under quite general conditions), including interior and boundary (quitting productive activity) outcomes. The separation of the outcomes depends crucially on both idiosyncracies, individual talent and individual market access (including or depending on market size) where the second one di ers in particular across geographic, linguistic, and aesthetic dimensions.