We develop a multi-agent model of the education production function where investments of students, parents, and teachers are linked to the presence of minorities in the classroom. We then test the key implications of this model using rich survey data and a mandate to randomly assign students to...

Much of the empirical literature on the natural rate of interest has focused on estimating its path. This paper addresses the question of how exogenous movements in the natural rate of interest affect aggregate activity and inflation in the short and long runs. To this end it proposes a...