Growth and coalition formation

In this paper we analyse a growth model where agents have different factors' endowments and form coalitions to produce output. Economic growth is the result of accumulation of human capital. The latter is a by-product of production activity within a coalition. The grand coalition corresponds to the maximum efficient agentsùallocation. However, due to heterogeneous endowments rich agents could not be an incentive to form a coalition with poor agents if rule governing the division of coalition output states an equal sharing among all members of coalitions. Rich agents tend to form coalitions among themselves and poor agents cannot benefit of positive externalities of coalescing with richer agents. This determines both a lower output and a lower long-run growth rate.