Historical evidence suggests that corporations have played a major role in producing information about and in promoting individual talents. This paper analyzes the implications of the corporate promotion mechanism for technological progress and macroeconomic development.
First, given that the fraction of detected talents may depend negatively upon the degree of technological sophistication and that private mangers do not appropriate the full social gains of corporate promotions; too skill-intensive new technologies tend to be adopted in equilibrium, the result being a socially excessive rate of technological progress.
Next, in a two-sector economy where an informal, low-productivity sector producing little or no information about talents coexists with the formal corporate sector, information accumulation may exhibit perverse dynamics: low initial information about individual talents may lead the economy to a low-output, low-mobility steady state or "trap", especially when more sophisticated technologies are made available "too soon". Wealth-redistribution policies turn out to be partly ineffective at eliminating this trap; whereas returning for some time to less sophisticated technologies and/or directly subsidizing corporate detection activities can favour the emergence of a broader managerial elite and thereby ensure the transition to the high-output, high-mobility, steady state.