A Theory of Racial Diversity, Segregation, and Productivity

Chad Sparber

No 2007-03, Working Papers from Department of Economics, Colgate University

Abstract: Empirical evidence illustrates that diversity generates both economic costs and benefits. This paper develops a theoretical model that accounts for the positive and deleterious effects of heterogeneity. First, an expanded Solow Growth Model demonstrates that the direct effects of diversity can be positive or negative, and depend upon the size of fixed parameter values. Second, diversity also influences individuals’ location decisions. Segregation (variation of diversity across regions) always reduces national output per worker, so if diversity induces integration, it indirectly augments productivity as well. Finally, political policies aimed at reducing interaction costs across groups may actually reduce aggregate output per worker by encouraging segregation.

Keywords: Diversity; Segregation; Macroeconomic Productivity; Growth and Development Theory (search for similar items in EconPapers)
JEL-codes: J10 J24 O40 O51 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-eff and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: A theory of racial diversity, segregation, and productivity (2008)
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