Growth and Coalition Formation

Davide Fiaschi and Pier Mario Pacini ()
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Pier Mario Pacini: University of Pisa

A chapter in Nonlinear Dynamics and Heterogeneous Interacting Agents, 2005, pp 171-188 from Springer

Abstract: Summary In this paper we analyse a growth model where agents have different factor endowments and form coalitions to produce output. Economic growth is the result of the accumulation of human capital. The latter in turn is a by-product of the production activity within a coalition. The maximum rate of growth is obtained when the grand coalition forms. However, if endowments are heterogeneous and the rule governing the division of the coalitional output states an equal sharing among the members of a coalition, agents with better endowments may not be willing to coalesce with poorly endowed agents. Indeed richer agents tend to form coalitions among themselves and the poor ones cannot benefit of the positive externalities of coalescing with the richest agents. This determines both a lower output and a lower long-run growth rate.

Keywords: Human Capital; Initial Distribution; Gini Index; Coalition Formation; Coalition Structure (search for similar items in EconPapers)
Date: 2005
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Working Paper: Growth and coalition formation (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-540-27296-0_12

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DOI: 10.1007/3-540-27296-8_12

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