A Theory of Racial Diversity, Segregation, and Productivity

Posted: 28 Mar 2009

See all articles by Chad Sparber

Chad Sparber

Colgate University - Economics Department

Date Written: May 8, 2007

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

JEL Classification: O40, J24, O51, J10

Suggested Citation

Sparber, Chad, A Theory of Racial Diversity, Segregation, and Productivity (May 8, 2007). Journal of Development Economics, Vol. 87, No. 2, 2008, Available at SSRN: https://ssrn.com/abstract=1369489

Chad Sparber (Contact Author)

Colgate University - Economics Department ( email )

13 Oak Drive
Hamilton, NY 13346
United States

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