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Group Inequality

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  • Samuel Bowles
  • Glenn C. Loury
  • Rajiv Sethi

Abstract

We explore the combined effect of segregation in social networks, peer effects, and the relative size of a historically disadvantaged group on the incentives to invest in market-rewarded skills and the dynamics of inequality between social groups. We identify conditions under which group inequality will persist in the absence of differences in ability, credit constraints, or labor market discrimination. Under these conditions, group inequality may be amplified even if initial group differences are negligible. Increases in social integration may destabilize an unequal state and make group equality possible, but the distributional and human capital effects of this depend on the demographic composition of the population. When the size of the initially disadvantaged group is sufficiently small, integration can lower the long-run costs of human capital investment in both groups and result in an increase the aggregate skill share. In contrast, when the initially disadvantaged group is large, integration can induce a fall in the aggregate skill share as the costs of human capital investment rise in both groups. We consider applications to concrete cases and policy implications.

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Bibliographic Info

Article provided by European Economic Association in its journal Journal of the European Economic Association.

Volume (Year): 12 (2014)
Issue (Month): 1 (02)
Pages: 129-152

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Handle: RePEc:bla:jeurec:v:12:y:2014:i:1:p:129-152

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Citations

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Cited by:
  1. Kevin Lang & Jee-Yeon K. Lehmann, 2011. "Racial Discrimination In The Labor Market: Theory And Empirics," Boston University - Department of Economics - Working Papers Series WP2011-019, Boston University - Department of Economics.
  2. Gioia de Melo, 2012. "Peer effects identified through social networks. Evidence from uruguayan schools," Documentos de Trabajo (working papers) 12-15, Instituto de EconomĂ­a - IECON.
  3. Glenn C. Loury, 1998. "Discrimination in the Post-Civil Rights Era: Beyond Market Interactions," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 117-126, Spring.
  4. Hanson, Steven D. & Robison, Lindon J., 2001. "Impacts Of Social Capital On Investment Behavior Under Risk," Staff Papers 11533, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  5. Uslaner, Eric, 2011. "Contact, Diversity, and Segregation," SULCIS Working Papers 2011:5, Stockholm University Linnaeus Center for Integration Studies - SULCIS.
  6. Mario Piacentini, 2008. "Migration Enclaves, Schooling Choices and Social Mobility," Development Working Papers 265, Centro Studi Luca d\'Agliano, University of Milano.
  7. Jane Glover, 2010. "Capital Usage in Adverse Situations: Applying Bourdieu’s Theory of Capital to Family Farm Businesses," Journal of Family and Economic Issues, Springer, vol. 31(4), pages 485-497, December.
  8. Patrick Mason, 1992. "The divide-and-conquer and employer/ employee models of discrimination: Neoclassical competition as a familial defect," The Review of Black Political Economy, Springer, vol. 20(4), pages 73-89, June.
  9. Kappius, Robert, 2011. "Equal opportunity in educational contexts: Comparing the feasibility of divergent conceptualizations," The Constitutional Economics Network Working Papers 02-2011, University of Freiburg, Department of Economic Policy and Constitutional Economic Theory.
  10. Kim, Young Chul, 2009. "Lifetime Network Externality and the Dynamics of Group Inequality," MPRA Paper 18767, University Library of Munich, Germany.
  11. Rajiv Sethi & Muhamet Yildiz, 2012. "Public Disagreement," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 57-95, August.
  12. Lopez-Rodriguez, Patricia & De la Torre Garcia, Rodolfo, 2000. "Closing the gap: the link between social capital and microfinance services," MPRA Paper 22974, University Library of Munich, Germany, revised Jun 2009.
  13. Alexandre, Michel, 2011. "Endogenous categorization and group inequality," MPRA Paper 33239, University Library of Munich, Germany.
  14. Kim, Young Chul, 2009. "Group Reputation and the Endogenous Group Formation," MPRA Paper 18575, University Library of Munich, Germany.
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