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Can affirmative action policies be inefficiently persistent?

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  • Jehiel, Philippe
  • Leduc, Mathieu V.

Abstract

We develop a dynamic model where successive, decentralized policy makers must decide whether to implement affirmative action policies aimed at improving the performance of future generations of a targeted group. Employers do not perfectly observe if a worker benefited from affirmative action, but take that possibility into account, resulting in the devaluation of the worker’s credentials and an associated feeling of injustice. We establish that, in equilibrium, affirmative action is implemented perpetually by benevolent policy makers, despite the feeling of injustice that eventually dominates the anticipated benefits. This contrasts with the first best, which requires affirmative action to be temporary.

Suggested Citation

  • Jehiel, Philippe & Leduc, Mathieu V., 2024. "Can affirmative action policies be inefficiently persistent?," European Economic Review, Elsevier, vol. 166(C).
    • Handle: RePEc:eee:eecrev:v:166:y:2024:i:c:s0014292124000837
    DOI: 10.1016/j.euroecorev.2024.104754
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    Keywords

    Affirmative action; General equilibrium; Loss aversion; Prospect theory; Moral hazard; Game theory; Tragedy of the commons;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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