Affirmative Action in a Competitive Economy

SSRI Working Paper No. 9914

17 Pages Posted: 22 Nov 2000

See all articles by Peter Norman

Peter Norman

University of British Columbia - Department of Economics

Andrea Moro

Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: April 15, 2000

Abstract

We consider a model of endogenous human capital formation with competitively determined wages, where discrimination between ex ante identical groups is sustainable in equilibrium. An affirmative action policy consisting of a quota may "fail" in the sense that there still may be equilibria where groups are treated differently. However, the incentives to invest for agents in the discriminated group are improved by affirmative action if the initial equilibrium is the most discriminatory equilibrium in the model without the policy. The welfare effects are ambiguous. We demonstrate that it is possible that the policy makes the intended beneficiaries worse off: even if the starting point is the most discriminatory equilibrium the expected payoff may decrease for all agents in the target group.

Keywords: Affirmative Action, Statistical Discrimination, General equilibrium, Asymmetric Information, Human Capital

JEL Classification: D58, D62, D82, J41, J71, J78

Suggested Citation

Norman, Peter and Moro, Andrea, Affirmative Action in a Competitive Economy (April 15, 2000). SSRI Working Paper No. 9914, Available at SSRN: https://ssrn.com/abstract=249192 or http://dx.doi.org/10.2139/ssrn.249192

Peter Norman (Contact Author)

University of British Columbia - Department of Economics ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z2
Canada
(604) 822-2839 (Phone)

HOME PAGE: http://faculty.arts.ubc.ca/pnorman/

Andrea Moro

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

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