Homophily, selection, and choice in segregation models.

Schelling's 1971 work on the dynamics of segregation showed that even a small degree of homophily, the desire to live among like neighbors, can lead to a starkly segregated population. One of the driving factors for this result is that the notion of homophily used is based on group identities that are exogenous and immutable. In contrast, we consider a homophily that arises from the desire to be with neighbors who are behaviorally similar, not necessarily those who have the same group identity. The distinction matters because behaviors are neither exogenous nor immutable but choices that can change as individuals adapt to their neighborhoods. We show that in such an environment, integration rather than segregation is the typical outcome. However, the tendency toward adaptation and integration can be impeded when economic frictions in the form of income inequality and housing cost are present.

Will the Needs-Based Planning of Health Human Resources Currently Undertaken in Several Countries Lead to Excess Supply and Inefficiency?

Recently, the emphasis on health human resources (HHR) planning has shifted away from a utilization-based approach toward a needs-based one in which planning is based on the projected health needs of the population. However, needs-based models that are currently in use rely on a definition of 'needs' that include only the medical circumstances of individuals and not personal preferences or other socio-economic factors. We examine whether planning based on such a narrow definition will maximize social welfare. We show that, in a publicly funded healthcare system, if the planner seeks to meet the aggregate need without taking utilization into consideration, then oversupply of HHR is likely because 'needs' do not necessarily translate into 'usage.' Our result suggests that HHR planning should track the healthcare system as access gradually improves because, even if health care is fully accessible, individuals may not fully utilize it to the degree prescribed by their medical circumstances.