Heterogeneity, Stratification and Growth

Roland Benabou

No 815, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Education; Externalities; Growth; Human Capital; Inequality; Stratification (search for similar items in EconPapers)
JEL-codes: D26 I21 J24 O41 (search for similar items in EconPapers)
Date: 1993-08
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Citations: View citations in EconPapers (9)

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