| Abstract | Institutional environment such as property rights, legal system, contract supervision and implementation is very important to a country's economic growth, a large number of empirical studies also support this conclusion. It is generally believed that the truly working mechanism is that good Institutional environment can stimulate the entrepreneur’s talent, and talent is considered as an important driving force for economic growth. Therefore, the allocation of entrepreneurial talent is also very important. Our paper is to establish the formal theory, and discuss how the improvement of Institutional environment influences the allocation of entrepreneurial talent. In this paper, talents are heterogeneity, and activities are divided into two categories: one is the "productive" activities as creating the real wealth, such as the establishment of the enterprise; the other is "non productive" activities such as rent seeking, and then we use the comparative static analysis to discuss the influence of the Institutional environment on the choice of these two activities. The analysis of this paper shows that, when the Institutional environment becomes more friendly, whether the marginal output of rent seeking is more advantageous or not, more people will give up rent-seeking to the actual production. This means that the allocation of the entrepreneurial talent is more optimized, and then the foundation of economic growth is more excellent. |