A Model of Social Interactions and Endogenous Poverty Traps

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A Model of Social Interactions and Endogenous Poverty Traps

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Title: A Model of Social Interactions and Endogenous Poverty Traps
Author: Fryer, Roland
Citation: Fryer, Roland G. Jr. 2007. A model of social interactions and endogenous poverty traps. Rationality and Society 19, no. 3: 335-366.
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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.
Published Version: http://dx.doi.org/10.1177/1043463107080450
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:2958480
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