Glenn Loury and
Rajiv Sethi ()
Journal of the European Economic Association, 2014, vol. 12, issue 1, 129-152
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.
References: Add references at CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Group Inequality (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jeurec:v:12:y:2014:i:1:p:129-152
Access Statistics for this article
Journal of the European Economic Association is currently edited by Fabrizio Zilibotti, Dirk Bergemann, Nicola Gennaioli, Claudio Michelacci and Daniele Paserman
More articles in Journal of the European Economic Association from European Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().