In this paper, we identify a mechanism, which we contend chronically reproduces and, under some conditions, may generate or even efface intergroup inequality. That mechanism is (a) the diffusion of goods, services, and practices that (b) are characterized by strong network externalities under conditions of (c) social homophily. When the value of a good or practice to an agent is a function of the number of persons in that agent's network who also possess the good or engage in the practice, and when networks are homophilic with respect to certain social characteristics, this mechanism will exacerbate initial individual-level differences in access to the good or practice and, under some conditions, induce persistent intergroup inequality. We illustrate this claim in two empirical contexts. For the first, the diffusion of access to and use of the Internet, we start with observed data on the relationship between cost and adoption and between adoption levels and price, and produce a computational model that permits us to predict variation in intergroup inequality over time as a function of variation in the strength of network externalities and the extent of social homophily. For the second, the practice of rural-to-urban migration by young people in rural Thailand, we use village-level data on family resources and migration patterns to explore the relationship between information sharing, homophily, and intergroup differences in migration.