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College Diversity and Investment Incentives

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  • Newman, Andrew
  • Gall, Thomas

Abstract

This paper studies the aggregate economic effects of diversity policies such as affirmative action in college admission. If agents are constrained in the side payments they can make, the free market allocation displays excessive segregation relative to the first-best. Affirmative action policies can restore diversity within colleges but also affect incentives to invest in pre-college scholastic achievement. Affirmative action policies that are achievement-based can increase aggregate investment and income, reduce inequality, and increase aggregate welfare relative to the free market outcome. They may also be more effective than decentralized policies such as cross-subsidization of students by colleges.

Suggested Citation

  • Newman, Andrew & Gall, Thomas, 2015. "College Diversity and Investment Incentives," CEPR Discussion Papers 10337, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10337
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    1. Fernanda Estevan & Thomas Gall & Louis-Philippe Morin, 2019. "Redistribution Without Distortion: Evidence from an Affirmative Action Programme at a Large Brazilian University," The Economic Journal, Royal Economic Society, vol. 129(619), pages 1182-1220.
    2. Thomas Gall & Xiaocheng Hu & Michael Vlassopoulos, 2019. "Dynamic incentive effects of assignment mechanisms: Experimental evidence," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(4), pages 687-712, November.

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    Keywords

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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J78 - Labor and Demographic Economics - - Labor Discrimination - - - Public Policy (including comparable worth)

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