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's group is partly determined by group-specific investments made by individuals. I prove three main...

Explaining the evolution and maintenance of cooperation among unrelated individuals is one of the fundamental problems in biology and the social sciences. Recent experimental evidence suggests that altruistic punishment is an important mechanism to maintain cooperation among humans. In this...