XML Schemas: Reference or Named Type?

[crazyfishpants]

When creating an XSD schema, what is better to use: references or named types?

The XML I am working with has recursion in it, making both approaches possible. But which one is better and why?

XML EXAMPLE:

<root>
<type a>
<type a>
...
<type b>
<type b>
<type a>
...

REFERENCE:

element b

element a
reference to element b
reference to element a

element root
reference to element a

NAMED TYPE:

type b

type a
element b
element a

type root
element a