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Affirmative Action in the Presence of Income Heterogeneity

Guha, Brishti and Roy Chowdhury, Prabal (2017): Affirmative Action in the Presence of Income Heterogeneity.

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Abstract

We examine affirmative action, class-based (CAA), as well as identity-based (IAA), in an economy with income heterogeneity and diverse identity groups. We establish that with class-based affirmative action there exists an equilibrium that is colour-blind, i.e. the poor face the same standards while being assigned to skilled jobs irrespective of their identity, as do the rich. Further, if affirmative action is identity-based, then there exists an equilibrium that has elements of patronization in that black workers of both income classes face lower standards relative to their white counterparts. Interestingly, a comparison shows that the relative preferences for the two policies are completely class-based, with all poor workers preferring CAA, whereas all rich workers prefer IAA. In fact, poor black workers prefer CAA though they benefit from affirmative action under both IAA and CAA, whereas the rich white workers prefer IAA though they are not protected under either form of affirmative action. Moreover, there exist economies where CAA ensures that all poor workers are assigned to the skilled task with positive probability, whereas under IAA that is not necessarily true.

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