He points to the case of 16-year-old Theo Walcott, who recently joined Arsenal from Southampton for an initial £5million fee.
Allardyce said: "The money commanded for him epitomises the lack of quality in this country. A young lad as talented as he is fetches so much money because there are so few like him."
He added: "Even though we have some talented youngsters they are not as many as there used to be.
"When you hear that an eight-year-old is deciding on whether to go to Arsenal or Chelsea, it shows what problems this country has in terms of developing our own youngsters.
"If I find a youngster and he becomes the next Walcott or Frank Lampard will I be able to keep him for our first team?
"It will be very difficult because there are so few players and we are fighting over them at a very young age."
At Bolton Kevin Nolan, Joey O'Brien, Nicky Hunt and Ricardo Vaz Te have all come through the ranks.
Allardyce said: "They have been crucial to the success of this club and it is important we develop even more young players. But finding your own youngsters is difficult and keeping them just as hard.
"Overall there is a lack of quality players around, not just in England but throughout the world. That's why those at the top end are attracting bigger values than before."
Meanwhile, Derby County have parted company with former Trotters assistant manager Phil Brown just seven months into his reign at Pride Park.
A statement from Derby on Monday said: "We would like to thank Phil for the time and effort he has given."