Social Identity and Economic Performance

Abstract This paper explores the extent to which social interactions may,be responsible,for hin- dering economic mobility and pertuating inequality between groups. In particular, we model,social identity as a preference,for conformity and incorporate such preferences in a standard,OLG model.,We characterize general,conditions with homogeneous agents,under,which there exists a unique,steady,state and show,that social prefer- ences have no impact on its location. With heterogeneous agents, however, social preferences,do have,an impact,on both mobility and between-group,inequality. We also show,that occupational,conformity may,perpetuate,and aggravate,poverty traps.