Meritocracy and Inequality

How do individuals behave in a society that rewards "merit", despite not being all on the same starting line? Does inequality in head starts make meritocracy undesirable? Attempting to answer these questions, this paper develops a model of career concerns in which agents publicly choose among several activities in which to exert effort, and differ along a privately observable characteristic ("head start") that affects their performance. The agents’ audience values talent, effort and head start. We highlight two contrasting effects: a displacement effect by which the "poor" (head start-wise) try to avoid a lower talent image and thus avoid the activity chosen by the "rich", and a distinction effect by which the rich try to reap a higher head-start image and thus avoid the activity chosen by the poor. While displacement drags the poor towards activities with lower incentives on effort, distinction pulls the rich towards activities with higher incentives. Interpreting the model in terms of "meritocracy", we emphasize how the dominance of displacement or distinction can cause well-meaning policy interventions to backfire, and make meritocracy desirable or not.