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Research Details

Wealth Dynamics in Communities

Abstract

This paper explores how favor exchange in communities influences investment and wealth dynamics. Our main result identifies a key obstacle to wealth accumulation: wealth crowds out favor exchange. Low-wealth households are forced to choose between growing their wealth and maintaining access to the support of their communities. The result is that some communities are "left behind," with wealth disparities persisting, and sometimes growing, over time. Using numerical simulations, we show that "place-based" policies encourage both favor exchange and wealth accumulation and so have the potential to especially benefit left-behind communities.

Type

Working Paper

Author(s)

Daniel Barron, yingni guo, Bryony Reich

Date Published

2020

Citations

Barron, Daniel, yingni guo, and Bryony Reich. 2020. Wealth Dynamics in Communities.

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