Neighborhood feedbacks, endogenous stratification, and income inequality

This paper explores the evolution of the cross-section income distribution in economies where endogenous neighborhood formation interacts with positive within-neighborhood feedback effects. We study an economy in which the economic success of adults is determined by the characteristics of the families in the neighborhood in which a person grows up. These feedbacks take two forms. First, the tax base of a neighborhood affects the leveI of education investment in offspring. Second, the effectiveness of education investment is affected by a neighborhood's in come distribution, reflecting factors such as role model or labor market connection effects. Conditions are developed under which endogenous stratification, defined as the tendency for families wi th similar incomes to choose to form common communities, will occur. When families are allowed to choose their neighborhoods, wealthy families will have an incentive to segregate themselves from the rest of the population. This resulting stratification is supported by house price differences between ricli and poor communities. Endogenous stratification can lead to pronounced intertemporal inequality as different families provide very different interaction environments for offspring. When the transformation of human capital into in come exhibits constant retums to scale, cross-section in come differences may also grow across time. As a result, endogenous stratification and neighborhood feedbacks can interact to produce long run inequality.

Neighborhood information exchange and voter participation : an experimental study

We study the effect of social embeddedness on voter turnout by investigating the role of information about other voters’ decisions. We do so in a participation game, where some voters (‘receivers’) are told about some other voters’ (‘senders’) turnout decision at a first stage of the game. Cases are distinguished where the voters support the same or different candidates or where they are uncertain about each other’s preferences. Our experimental results show that such information matters. Participation is much higher when information is exchanged than when it is not. Senders strategically try to use their first mover position and some receivers respond to this.