 Social Externalities, Overlap and the Poverty TrapYoung-Chul Kim and Glenn Loury MPRA Paper from University Library of Munich, Germany Abstract: Previous studies find that some social groups are stuck in poverty traps because of network effects. However, these studies do not carefully analyze how these groups overcome low human capital investment activities. Unlike previous studies, the model in this paper includes network externalities in both the human capital investment stage and the subsequent career stages. This implies that not only the current network quality, but also the expectations about future network quality affect the current investment decision. Consequently, the coordinated expectation among the group members can play a crucial role in the determination of the final state. We define "overlap" for some initial skill ranges, whereby the economic performance of a group can be improved simply by increasing expectations of a brighter future. We also define "poverty trap" for some ranges, wherein a disadvantaged group is constrained by its history, and we explore the egalitarian policies to mobilize the group out of the trap. Keywords: Group Inequality; Network Externality; Overlap; Poverty Trap (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:54953 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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