Complementarities, Coordination, and Culture

54 Pages Posted: 19 Jul 2016

See all articles by Christopher J. Ellis

Christopher J. Ellis

University of Oregon - Department of Economics

Jon Thompson

Willamette University - Public Policy Research Center

Jiabin Wu

University of Oregon - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 16, 2016

Abstract

We develop a new model of the intergenerational transmission of culture based on the labor market characteristics of different cultural types. Following Borjas (1994,1995) we assume that cultural heterogeneity increases labor productivity due to skill complementarities, however following Jackson and Xing (2014) we also assume that cultural heterogeneity hampers communication. We model this as a game in which individuals first engage in uniformly random matching, and then once matched play a coordination game. Other-type matches are thus potentially more productive, but also less likely to coordinate. We show that this set up can replicate many of the seminal results of Bisin and Verdier (2001) without assuming imperfect empathy. This means that we do not face the inherent difficulties that such models involve when making welfare statements. Further, we are able to obtain new results concerning the efficient size of a cultural minority, the effects of tax and welfare programs on the size and welfare of minorities, and the relationship between the intensity of social interaction and size and welfare of a minority. In an extension of the model we introduce “intermediaries” who may either facilitate other-type matching or improve after-match coordination. We then ask which parent population, the minority or majority, the intermediaries arise from and explore their implications for the equilibrium and welfare.

Keywords: cultural transmission, coordination games, social interaction, minorities, intermediaries, tax and welfare programs

JEL Classification: A140, C730, D100, Z130

Suggested Citation

Ellis, Christopher J. and Thompson, Thompson and Wu, Jiabin, Complementarities, Coordination, and Culture (June 16, 2016). CESifo Working Paper Series No. 5949. Available at SSRN: https://ssrn.com/abstract=2811018

Christopher J. Ellis (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

Thompson Thompson

Willamette University - Public Policy Research Center ( email )

900 State Street
Salem, OR 97301
United States

Jiabin Wu

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

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