TY  - JOUR
AU  - Fryer,Roland G., Jr.
TI  - A Model of Social Interactions and Endogenous Poverty Traps
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12364
PY  - 2006
Y2  - July 2006
UR  - http://www.nber.org/papers/w12364
L1  - http://www.nber.org/papers/w12364.pdf
N1  - Author contact info:
Roland G. Fryer, Jr
Department of Economics
Harvard University
Littauer Center 208
Cambridge, MA  02138
Tel: 617/495-9592
Fax: 617/495-8570
E-Mail: rfryer@fas.harvard.edu
M2  - featured in NBER digest on 2006-07-24
AB  - 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%u2019s 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 %u2014 creating a tradeoff between human capital and cooperation among the group. Second, there exist equilibria which exhibit bi-polar human capital investment behavior by individuals of similar ability. Third, as social mobility increases this bi-polarization increases. The models predictions are consistent with the bifurcation of distinctively black names in the mid-1960s, the erosion of black neighborhoods in the 1970s, accusations of %u2018acting white,%u2019 and the efficacy of certain programs designed to encourage human capital acquisition.
ER  -