On Decentralized Affirmative Action Policies and Their Duration

32 Pages Posted: 11 May 2021 Last revised: 6 Jul 2022

See all articles by Philippe Jehiel

Philippe Jehiel

University College London - Department of Economics; Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR)

Mathieu V. Leduc

Paris School of Economics (PSE) / Université Paris 1

Date Written: June 30, 2022

Abstract

Successive decentralized policy makers must decide whether to implement an affirmative action policy aimed at improving the performance distribution of future generations of a targeted group in their district. Workers receive wages corresponding to their expected performance, suffer a feeling of injustice when getting less than their actual performance, and employers do not observe district by district whether workers benefited from affirmative action. We find that welfare-maximizing policy makers choose to implement affirmative action perpetually, despite the resulting feeling of injustice that eventually dominates the anticipated beneficial effect on the targeted group's performance. This is in contrast with the first-best that requires affirmative action to be temporary.

Keywords: Affirmative Action, General Equilibrium, Loss Aversion, Prospect Theory, Moral Hazard, Game Theory

JEL Classification: D40, I28, I30, J15

Suggested Citation

Jehiel, Philippe and Leduc, Mathieu V., On Decentralized Affirmative Action Policies and Their Duration (June 30, 2022). Available at SSRN: https://ssrn.com/abstract=3842996 or http://dx.doi.org/10.2139/ssrn.3842996

Philippe Jehiel

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4458 2873 (Phone)
+33 1 4458 2880 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mathieu V. Leduc (Contact Author)

Paris School of Economics (PSE) / Université Paris 1 ( email )

48 boulevard Jourdan
Paris, 75014
France

HOME PAGE: http://sites.google.com/site/mattvleduc/

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