Valuing Identity

31 Pages Posted: 6 Dec 2010 Last revised: 9 Oct 2024

See all articles by Roland G. Fryer

Roland G. Fryer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; University of Chicago

Glenn C. Loury

Brown University - Department of Economics; Brown University - Watson Institute for International and Public Affairs

Date Written: December 2010

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

Fryer, Roland G. and Loury, Glenn C., Valuing Identity (December 2010). NBER Working Paper No. w16568, Available at SSRN: https://ssrn.com/abstract=1719929

Roland G. Fryer (Contact Author)

Harvard University - Department of Economics ( email )

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Glenn C. Loury

Brown University - Department of Economics ( email )

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Brown University - Watson Institute for International and Public Affairs ( email )

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