Heterogeneity, Stratification, and Growth

No 4311, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine how economic stratification affects inequality and growth over time. We study economies where heterogenous agents interact through local public goods or externalities (school funding, neighborhood effects) and economy-wide linkages (complementary skills. knowledge spillovers). We compare growth and welfare when families are stratified into homogeneous local communities and when they remain integrated. Segregation tends to minimize the losses from a given amount of heterogeneity, but integration reduces heterogeneity faster. Society may thus face an intertemporal tradeoff: mixing leads to slower growth in the short run, but to higher output or even productivity growth in the long run. This tradeoff occurs in particular when comparing local and national funding of education, which correspond to special cases of segregation and integration. More generally, we identify the key parameters which determine which structure is more efficient over short and long horizons. Particularly important are the degrees of complementarity in local and in global interactions.

JEL-codes: D62 O41 (search for similar items in EconPapers)
Date: 1993-04
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

Published as modified title: "Heterogeneity, Stratification and Growth: Macroeconomicmplications of Community Structure and School Finance," American Economic Review, vol. 86, no. 3, pp. 584-609, June 1996.

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Related works:
Working Paper: Heterogeneity, Stratification and Growth (1993)
Working Paper: Heterogeneity, Stratification, and Growth (1992)
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