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About: Galor–Zeira model     Goto   Sponge   NotDistinct   Permalink

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The Galor-Zeira model is the first macroeconomic model to explore the role of heterogeneity in the determination of macroeconomic behavior. In contrast to the representative agent approach that dominated the field of macroeconomics till the early 1990s and argued that heterogeneity has no impact on macroeconomic activity, the model demonstrates that in the presence of capital markets imperfections and local non-convexities in the production of human capital, income distribution affects the long run level of income per-capita as well as the growth process.