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A theory of racial diversity, segregation, and productivity

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  • Sparber, Chad

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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 87 (2008)
Issue (Month): 2 (October)
Pages: 210-226

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Handle: RePEc:eee:deveco:v:87:y:2008:i:2:p:210-226

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Cited by:
  1. Pierpaolo Parrotta & Dario Pozzoli & Mariola Pytlikova, 2011. "Does Labor Diversity affect Firm Productivity?," Norface Discussion Paper Series 2011022, Norface Research Programme on Migration, Department of Economics, University College London.
  2. Thomas Kemeny, 2013. "Immigrant Diversity and Economic Development in Cities: A Critical Review," SERC Discussion Papers 0149, Spatial Economics Research Centre, LSE.
  3. Dana Schüler & Julian Weisbrod, 2010. "Ethnic fractionalisation, migration and growth," Empirical Economics, Springer, vol. 39(2), pages 457-486, October.
  4. Ryusuke Ihara & Shizu Yamamoto, 2012. "Does labor diversity cause agglomeration in Japan?: an NEG approach with a covariance structure analysis," ERSA conference papers ersa12p430, European Regional Science Association.
  5. Giovanni Peri & Chad Sparber, 2008. "Highly-Educated Immigrants and Native Occupational Choice," CReAM Discussion Paper Series 0813, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  6. Francesca Mazzolari & David Neumark, 2012. "Immigration and product diversity," Journal of Population Economics, Springer, vol. 25(3), pages 1107-1137, July.
  7. Ryusuke Ihara, 2011. "Agglomeration with the pros and cons of labor heterogeneity," ERSA conference papers ersa11p528, European Regional Science Association.

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