Endogenous categorization and group inequality

The objective of this paper is to integrate economic and sociological elements in a model of human capital accumulation by phenotypically distinct individuals. Both kinds of elements are influenced by the degree of categorization endogeneity (CE), meant as the influence of endogenous elements (e.g., behavioral traits) in group categorization. If CE is high, members of dominated groups can pass as members of dominant groups by adopting the behavioral norm associated with that group. CE facilitates group equality by decreasing the ability to discriminate between members of dominant and dominated groups, but it weakens intra-group neighborhood effects. It is argued that, under sufficiently low levels of discrimination, CE widens the range of values of the neighborhood effects parameter for which group inequality is stable.