Stratification Economics

This project is an ongoing effort to formalize a stratification economics framework that connects the empirical analysis in my research to its theoretical foundation. Stratification economics recognizes that power structures (i.e., laws, institutions, and social norms) construct and maintain social groups, group identities, and hierarchies, then unequally set different “rules of the game” across them. These social constructions, together with relative rank and unequal economic endowments, shape both individual utility and patterns of interaction, contributing to persistent inequality. This framework generalizes standard microeconomic theory by allowing the primitives of the model (endowments, preferences, and institutional incentives) to be systematically shaped by social identity and power structures.

My objective is to develop a tractable framework that can be taken to data and tested empirically. As I work toward this, I share the development of the model piece by piece to invite feedback and open dialogue.

How to Read This Project

Framework structure:

Endowments → Utility → Institutions → Perceptions → SNE → SGE → Propositions

The framework is developed in a sequence of short notes, each introducing a distinct layer of the model. Together, they move from primitives to equilibrium and welfare.

• Note 1: Groups and Endowments
  Power structures construct social groups and assign unequal economic endowments across identities.

• Note 2: Identity and Utility
  Individuals make decisions using identity-conditioned utility functions that incorporate group welfare, status, rank, and social penalties.

• Note 3: Institutional Payoff Maximization
  Institutions optimize under stratification, facing identity-conditioned risks, incentives, and hierarchy-preserving pressures.

• Note 4: Perceptions and Discrimination
  Signals map into perceived identity and ability, generating both systemic and direct discrimination.

• Note 5: Stratified Nash Equilibrium (SNE)
  Individual and institutional behavior interact to produce equilibrium outcomes under stratification.

• Note 6: Stratified General Equilibrium (SGE) and Welfare
  The model aggregates to the economy-wide level and introduces welfare concepts based on opportunity sets and group-conditioned outcomes.

• Note 7: Core Propositions
  The framework is summarized through key theoretical results that link the model to empirical predictions.

Each note can be read independently, but together they form a unified framework connecting structure, behavior, and inequality.

Stratification Foundations: Groups and Endowments 

This note introduces the first building block of the framework: how power structures define groups, construct social hierarchies, and assign unequal economic endowments. It formalizes how individuals draw from identity-conditioned distributions of opportunity.

The note contrasts this structuralist perspective with the traditional individualist view, showing how group-level advantages and disadvantages shape individual outcomes before preferences or behavior enter the model.

Stratification Foundations: Identity and Utility

This note develops the second building block: how group identity shapes individual decision-making. It formalizes a utility framework in which individuals weigh private payoffs alongside group welfare, group status, positional rank, and identity-linked penalties.

The note shows how identity-conditioned inputs and preferences generate systematic differences in behavior and outcomes, even among individuals with identical private tastes.

Stratification Foundations: Institutional Payoff Maximization

This note extends the framework to institutions, which play a central role in allocating resources and shaping outcomes. It formalizes how institutions maximize payoff functions under stratification, incorporating identity-conditioned risks, hierarchy-preserving pressures, and potential taste or status-based preferences.

The note shows that even optimizing institutions can systematically reproduce inequality when operating within stratified environments, providing a mechanism through which group disparities persist beyond individual decision-making.

Stratification Foundations: Perceptions and Discrimination

This note introduces perceptions and discrimination into the framework. It formalizes how observable signals map into perceived identities and abilities, and how these perceptions shape interactions between individuals and institutions.

The note distinguishes between systemic inequality arising from stratified endowments and additional disparities generated by misperception, prejudice, and classification errors, showing how multiple channels jointly reinforce inequality.

Stratification Foundations: Stratified Nash Equilibrium (SNE)

This note integrates the previous components of the framework into a strategic setting. It introduces the Stratified Nash Equilibrium (SNE), extending the standard Nash equilibrium to environments with identity-conditioned endowments, utilities, institutional behavior, and perceptions.

The note shows how optimal behavior by individuals and institutions leads to equilibrium outcomes that systematically reproduce inequality, framing disparities as equilibrium results rather than deviations from efficiency.

Stratification Foundations: Stratified General Equilibrium (SGE) and Welfare

This note aggregates individual and institutional behavior to the economy-wide level. It defines the Stratified General Equilibrium (SGE) and characterizes how identity-conditioned endowments and institutional structures generate persistent inequality in aggregate outcomes.

The note also develops welfare concepts appropriate for stratified environments, emphasizing opportunity sets and group-conditioned outcomes, and shows how efficiency must be interpreted relative to stratified constraints.

Stratification Foundations: Core Propositions

This note summarizes the key theoretical implications of the framework. It formalizes core propositions linking identity-conditioned endowments to persistent inequality, heterogeneous policy effects, equilibrium behavior, and welfare.

The note provides a bridge between theory and empirics by translating the framework into testable predictions and comparative statics that can guide empirical research .

Page Last Updated: April 2026