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Vertical Diversity, Communication Gap and Equilibrium Growth

Vertical Diversity, Communication Gap and Equilibrium Growth AbstractThis paper examines the effect of vertical diversity in workers' skill on the long-run growth rate of an economy. It uses a two-sector model where the technology of the consumption-good sector is supermodular and that of the R&D sector is submodular. By adopting Grossman and Maggi's (2000) model to a framework of growth, it shows first that diversity is conducive to growth. As the main innovation, a notion of communication gap is introduced among workers. It is shown that if vertical diversity is sufficiently high relative to the communication gap, the growth rate may not increase with diversity; there may be an inverse-U shaped relationship. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B E Journal of Macroeconomics de Gruyter

Vertical Diversity, Communication Gap and Equilibrium Growth

Das, Satya P
The B E Journal of Macroeconomics , Volume 5 (1): 1 – Nov 23, 2005
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Publisher
de Gruyter
Copyright
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
ISSN
1935-1690
eISSN
1534-5998
DOI
10.2202/1534-5998.1334
Publisher site
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Abstract

AbstractThis paper examines the effect of vertical diversity in workers' skill on the long-run growth rate of an economy. It uses a two-sector model where the technology of the consumption-good sector is supermodular and that of the R&D sector is submodular. By adopting Grossman and Maggi's (2000) model to a framework of growth, it shows first that diversity is conducive to growth. As the main innovation, a notion of communication gap is introduced among workers. It is shown that if vertical diversity is sufficiently high relative to the communication gap, the growth rate may not increase with diversity; there may be an inverse-U shaped relationship.

Journal

The B E Journal of Macroeconomics – de Gruyter

Published: Nov 23, 2005

Keywords: Diversity; Talent Distribution; supermodular technology; submodular technology; growth; skill; R&D

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