Working Paper: NBER ID: w16568
Authors: Roland G. Fryer Jr.; Glenn Loury
Abstract: Affirmative action policies are practiced around the world. This paper explores the welfare economics of such policies. A model is proposed where heterogeneous agents, distinguished by skill level and social identity, compete for positions in a hierarchy. The problem of designing an efficient policy to raise the status in this competition of a disadvantaged identity group is considered. We show that: (i) when agent identity is fully visible and contractible (sightedness), efficient policy grants preferred access to positions, but offers no direct assistance for acquiring skills; and, (ii) when identity is not contractible (blindness), efficient policy provides universal subsidies when the fraction of the disadvantaged group at the development margin is larger then their mean (across positions) share at the assignment margin.
Keywords: Affirmative Action; Welfare Economics; Social Identity; Human Capital
JEL Codes: H2; J08; J15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| visibility (Y60) | effectiveness of affirmative action policies (J78) |
| blind environments (C92) | universal subsidies effectiveness (H23) |
| ex ante preferences (D11) | skill acquisition (J24) |
| ex post preferences (D11) | competitive advantages (L15) |