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Valuing Identity

  • Roland G. Fryer, Jr.
  • Glenn Loury

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16568.

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Date of creation: Dec 2010
Date of revision:
Publication status: published as Valuing Diversity Roland G. Fryer Jr. and Glenn C. Loury Journal of Political Economy Vol. 121, No. 4 (August 2013), pp. 747-774
Handle: RePEc:nbr:nberwo:16568
Note: LE LS PE
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  1. Roland G. Freyer, Jr. & Glenn C. Loury, . "Affirmative Action in Winner-Take-All Markets," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-132, Boston University - Department of Economics.
  2. 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.
  3. Andrea Moro & Peter Norman, . ""Affirmative Action in a Competitive Economy''," CARESS Working Papres 96-08, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  4. Harry Holzer & David Neumark, 1999. "Assessing Affirmative Action," NBER Working Papers 7323, National Bureau of Economic Research, Inc.
  5. 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 340-47, June.
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