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Expanding on the concept of ethnic human capital, the paper distinguishes between cultural assimilation compatible with persistent ethnic groups and assimilation through intermarriage and other mechanisms that blur distinctions and lead to the disappearance of ethnic identities. Economic determinants of “successful ” and “disadvantaged ” group outcomes are shown to be sensitive to the relationship between ethnic and general human capital, especially with regard to externalities in the processes by which they are formed. The role of income transfer regimes tied to ethnic group membership is also considered. Mailing address