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A Model of Social Interactions and Endogenous Poverty Traps

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  • Fryer, Roland
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    Abstract

    This paper develops a model of social interactions and endogenous poverty traps. The key idea is captured in a framework in which the likelihood of future social interactions with members of one's group is partly determined by group-specific investments made by individuals. I prove three main results. First, some individuals expected to make group-specific capital investments are worse off because their observed decision is used as a litmus test of group loyalty — creating a trade-off between human capital and cooperation among the group. Second, there exist equilibria which exhibit bipolar human capital investment behavior by individuals of similar ability. Third, as social mobility increases this bipolarization increases. The model's predictions are consistent with the bifurcation of distinctively black names in the mid-1960s, the erosion of black neighborhoods in the 1970s, accusations of 'acting white', and the efficacy of certain programs designed to encourage human capital acquisition.

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    File URL: http://dash.harvard.edu/bitstream/handle/1/2958480/model%20of%20social%20interactions.pdf
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    Bibliographic Info

    Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 2958480.

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    Date of creation: 2007
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    Publication status: Published in Rationality and Society
    Handle: RePEc:hrv:faseco:2958480

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Edward P. Lazear, 1995. "Culture and Language," NBER Working Papers 5249, National Bureau of Economic Research, Inc.
    2. James J. Heckman, 2000. "Policies to Foster Human Capital," JCPR Working Papers 154, Northwestern University/University of Chicago Joint Center for Poverty Research.
    3. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November.
    4. Roland G. Fryer & Steven D. Levitt, 2003. "The Causes and Consequences of Distinctively Black Names," NBER Working Papers 9938, National Bureau of Economic Research, Inc.
    5. Borjas, George J, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 123-50, February.
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    Cited by:
    1. Sourav Bhattacharya & Joyee Deb & Tapas Kundu, 2012. "Mobility and Conflict," CESifo Working Paper Series 3699, CESifo Group Munich.
      • Sourav Bhattacharya & Joyee Deb & Tapas Kundu, 2011. "Mobility and Conflict," Working Papers 455, University of Pittsburgh, Department of Economics, revised Mar 2013.
      • Sourav Bhattacharya & Joyee Deb & Tapas Kundu, 2011. "Mobility and Conflict," Working Papers 11-20, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Fryer Jr., Roland G. & Torelli, Paul, 2010. "An empirical analysis of 'acting white'," Journal of Public Economics, Elsevier, vol. 94(5-6), pages 380-396, June.
    3. Fryer, Roland G. & Levitt, Steven D. & Kahn, Lisa & Spenkuch, Jörg L., 2010. "The Plight of Mixed Race Adolescents," MPRA Paper 23099, University Library of Munich, Germany.

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