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Research Details

Wealth Dynamics in Communities

Abstract

This paper develops a model to explore how favor exchange in communities influence wealth dynamics. We identify a key obstacle to wealth accumulation: wealth crowds out favor exchange. Therefore, low-wealth households are forced to choose between growing their wealth and accessing favor exchange within their communities. The outcome is that some communities are left behind, with wealth disparities that persist and sometimes even grow worse. Using numerical simulations, we show that place-based policies encourage both favor exchange and wealth accumulation and so have the potential to especially benefit such 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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