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Heterogeneity, Stratification, and Growth

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  • Benabou, R.
Abstract
This paper examines how economic stratification affects inequality and growth over time. It studies economies where heterogenous agents interact through local public goods or externalities (school funding, neighbourhood effects) and economy-wide linkages (complementary skills, knowledge spillovers). It compares 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 trade-off: mixing leads to slower growth in the short run, but to higher output or even productivity growth in the long run. This trade-off occurs in particular when comparing local and national funding of education, which correspond to special cases of segregation and integration. More generally, the paper identifies 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.
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Suggested Citation

  • Benabou, R., 1992. "Heterogeneity, Stratification, and Growth," Working papers 93-4, Massachusetts Institute of Technology (MIT), Department of Economics.
    • Handle: RePEc:mit:worpap:93-4
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    References listed on IDEAS

    as
    1. Tamura, Robert, 1992. "Efficient equilibrium convergence: Heterogeneity and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 355-376, December.
    2. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
    3. Fernandez, R. & Rogerson, R., 1992. "Income Distribution, Communities and the Quality of Public Education: A Policy Analysis," Papers 1, Boston University - Department of Economics.
    4. George J. Borjas, 2021. "Ethnic Capital And Intergenerational Mobility," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 6, pages 107-134, World Scientific Publishing Co. Pte. Ltd..
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    7. George J. Borjas, 2021. "Ethnicity, Neighborhoods, and Human-Capital Externalities," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 7, pages 135-160, World Scientific Publishing Co. Pte. Ltd..
    8. Durlauf, Steven N, 1996. "A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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    More about this item

    Keywords

    economic models ; economic analysis ; econometrics ; economic growth;
    All these keywords.

    JEL classification:

    • D26 - Microeconomics - - Production and Organizations - - - Crowd-Based Firms
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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