TY - JOUR AU - Epple,Dennis AU - Romano,Richard AU - Sieg,Holger TI - The Practice and Proscription of Affirmative Action in Higher Education:An Equilibrium Analysis JF - National Bureau of Economic Research Working Paper Series VL - No. 9799 PY - 2003 Y2 - June 2003 UR - http://www.nber.org/papers/w9799 L1 - http://www.nber.org/papers/w9799.pdf N1 - Author contact info: Dennis N. Epple Tepper School of Business Carnegie Mellon University Posner Hall, Room 257B Pittsburgh, PA 15213 Tel: 412/268-1536 Fax: 412/268-7357 E-Mail: epple@cmu.edu Richard Romano University of Florida E-Mail: richard.romano@cba.ufl.edu Holger Sieg Department of Economics University of Pennsylvania 3718 Locust Walk Philadelphia, PA 19104 Tel: 215 898 7194 Fax: 215-573-2057 E-Mail: holgers@econ.upenn.edu AB - The paper examines the practice of affirmative action and consequences of its proscription on the admission and tuition policies of institutions of higher education in a general equilibrium. Colleges are differentiated ex ante by endowments and compete for students that differ by race, household income, and academic qualification. Colleges maximize a quality index that is increasing in mean academic score of students, educational resources per student, an income-diversity measure, and a racial-diversity measure. The pool of potential nonwhite students has distribution of income and academic score with lower means than that of whites. In benchmark equilibrium, colleges may condition admission and tuition on race. In a computational model calibrated using estimates from related research, equilibrium has colleges offer tuition discounts and admission preference to nonwhites to promote racial diversity. Equilibrium entails a quality hierarchy of colleges, so the model predicts practices and characteristics of colleges along the hierarchy. Proscription of affirmative action requires that admission and tuition policies are race blind. Colleges then use the informational content about race in income and academic score in reformulating their optimal policies. Admission and tuition policies are substantially modified in equilibrium of the computational model, and both races are significantly affected. Representation of nonwhites falls significantly in all colleges. The drop is particularly pronounced in the top third of the quality hierarchy of colleges. ER -