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Valuing Identity

Author

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  • 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.

Suggested Citation

  • Roland G. Fryer, Jr. & Glenn Loury, 2010. "Valuing Identity," NBER Working Papers 16568, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16568
    Note: LE LS PE
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    References listed on IDEAS

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    1. Moro, Andrea & Norman, Peter, 2003. "Affirmative action in a competitive economy," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 567-594, March.
    2. Welch, Finis, 1976. "Employment Quotas for Minorities," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 105-139, August.
    3. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    4. Roland Fryer & Glenn Loury, 2005. "Affirmative action in winner-take-all markets," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 3(3), pages 263-280, December.
    5. Robert M. Costrell & Glenn C. Loury, 2004. "Distribution of Ability and Earnings in a Hierarchical Job Assignment Model," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1322-1363, December.
    6. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-347, June.
    7. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    8. David Neumark & Harry Holzer, 2000. "Assessing Affirmative Action," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 483-568, September.
    9. Roland G. Fryer Jr. & Glenn C. Loury, 2005. "Affirmative Action and Its Mythology," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 147-162, Summer.
    10. Jimmy Chan & Erik Eyster, 2003. "Does Banning Affirmative Action Lower College Student Quality?," American Economic Review, American Economic Association, vol. 93(3), pages 858-872, June.
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    Cited by:

    1. Perotti, Roberto & Labartino, Giovanna, 2011. "Academic Dynasties: Decentralization and Familism in the Italian Academia," CEPR Discussion Papers 8645, C.E.P.R. Discussion Papers.
    2. Yannis M. Ioannides, 2009. "Review: Scott E. Page The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies," Discussion Papers Series, Department of Economics, Tufts University 0729, Department of Economics, Tufts University.
    3. Laurence Kranich, 2012. "A Simple Theoretical Argument for Affrmative Action," Discussion Papers 12-05, University at Albany, SUNY, Department of Economics.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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