Language, Learning, and Location

Abstract

Fidel Perez, and Dana Rapoport for excellent research assistance. The views expressed here are those of the authors and are not necessarily reflective of the Federal Reserve Bank of New York or the Federal Reserve System. We also wish to thank the Rice University Center for the Study of Institutions and Values and the University of Virginia Sesquicentennial Program for financial support. Errors are our own. Language is a fundamental tool for communication of ideas between people, and so is an essential input into production and trade. In general, a society will possess more production and consumption opportunities when all its members share a common language. Neighboring societies and communities likewise have a strong incentive to utilize a common language, and indeed there are countless examples of language assimilation, especially in the last one hundred years. Hence, it is puzzling that more assimilation has not occurred. History has recorded numerous examples of communities that coexist with distinct languages and limited economic interaction. This paper presents a stylized model to reconcile both assimilation and non-assimilation. We abstract from cultural and historical factors, which are of course

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