Misallocation of Entrepreneurial Talent in Postconflict Environments. (February 2013)

• Record Type: Journal Article
• Authors: Sanders, M.; Weitzel, U.
• Is Part Of: Journal of conflict resolution. Volume 57:Number 1(2013)
• Page Start: 41
• Page End: 64
• Publication Date: 2013-02
• Subjects: Destructive Entrepreneurship -- Bottom-up reconstruction -- Postconflict regions -- incentives -- institutions; War and society -- Periodicals; Peace -- Periodicals; Arbitration (International law) -- Periodicals; 327.16
• DOI: 10.1177/0022002712464852
• Languages: English
• ISSNs: 0022-0027

Abstract

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.