Growth and coalition formation

Davide Fiaschi and Pier Mario Pacini

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: In this paper we analyse a growth model where agents have different factors' endowments and form coalitions to produce output. Economic growth is the result of accumulation of human capital. The latter is a by-product of production activity within a coalition. The grand coalition corresponds to the maximum efficient agentsuallocation. However, due to heterogeneous endowments rich agents could not be an incentive to form a coalition with poor agents if rule governing the division of coalition output states an equal sharing among all members of coalitions. Rich agents tend to form coalitions among themselves and poor agents cannot benefit of positive externalities of coalescing with richer agents. This determines both a lower output and a lower long-run growth rate.

Keywords: coalition formation; growth; stratification; inequality (search for similar items in EconPapers)
JEL-codes: C72 D31 O12 O15 (search for similar items in EconPapers)
Date: 2003-01-01
Note: ISSN 2039-1854
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Citations: View citations in EconPapers (12)

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Chapter: Growth and Coalition Formation (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2003/13

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