Industry Restructuring: A Case for Affirmative Action
We analyze the trade-off faced by authorities envisaging a one-shot structural reform in a capitalistic industry. A structure is modeled as (1) a sharing of productive capital at some time, and (2) a sharing of scarce sites or any other non-reproducible asset. These two distinct dimensions of policy illustrate the importance of a dynamic theory in which firms durably differ in several respects. Though equalization of endowments and rights is theoretically optimal, realistic constraints force competition authorities to adopt second-best solutions. Affirmative action here is the policy that recognizes the fact that, under certain circumstances, helping the disadvantaged contributes maximally to social surplus.
Volume (Year): (2013)
Issue (Month): 109-110 ()
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