Diversity Preferences, Affirmative Action and Choice Rules

Abstract

Many institutions implement affirmative action programs when hiring individuals or allocating resources, indicating a preference for diversity as well as quality. I introduce a framework to analyze diversity preferences and their effect on the affirmative action policies and choice rules adopted by these institutions. I characterize the choice rules that can be rationalized by diversity preferences and demonstrate that the rule that has been used to allocate government positions in India cannot be rationalized. I show that if institutions evaluate diversity using marginal, and not cross-sectional distribution of identities, then choices induced by their preferences cannot satisfy the substitutes condition, which is crucial for the existence of competitive equilibria and stable allocation in many settings. I characterize a class of choice rules that satisfy the substitutes condition and are rationalizable by preferences that evaluate diversity and quality separately and identify the preferences that induce some widely used choice rules. My results provide a systematic way of evaluating the diversity preferences behind the choices made by institutions.

Keywords: Matching Theory, Market Design, Affirmative Action

JEL Classification: C78, D47, J15