AbstractAffirmative 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16568.
Date of creation: Dec 2010
Date of revision:
Publication status: published as “Valuing Identity” (with G. Loury) [Available as NBER Working Paper No. 16568], Revised May 2012 [forthcoming in Journal of Political Economy]
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Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
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