NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Valuing Identity

Roland G. Fryer, Jr., Glenn Loury

NBER Working Paper No. 16568
Issued in December 2010
NBER Program(s):   LE   LS   PE

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.

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Document Object Identifier (DOI): 10.3386/w16568

Valuing Identity” (with G. Loury) [Available as NBER Working Paper No. 16568], Revised May 2012 [forthcoming in Journal of Political Economy]

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