College Diversity and Investment Incentives

57 Pages Posted: 23 Jan 2015

See all articles by Thomas Gall

Thomas Gall

University of Southampton - Division of Economics

Patrick Legros

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Northeastern University, department of economics; Centre for Economic Policy Research (CEPR)

Andrew F. Newman

Boston University - Department of Economics

Date Written: January 2015

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.

Keywords: affirmative action, education, matching, misallocation, multidimensional attributes, nontransferable utility, segregation

JEL Classification: C78, I28, J78

Suggested Citation

Gall, Thomas and Legros, Patrick and Newman, Andrew F., College Diversity and Investment Incentives (January 2015). CEPR Discussion Paper No. DP10337. Available at SSRN: https://ssrn.com/abstract=2554411

Thomas Gall (Contact Author)

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom

Patrick Legros

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4219/3 (Phone)
+32 2 650 4475 (Fax)

Northeastern University, department of economics ( email )

301 Lake Hall
Boston, MA 02115
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrew F. Newman

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-358-4354 (Phone)
617-353-4143 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
1,025
PlumX Metrics