Krishna, Kala; Tarasov, Alexander
Affirmative Action: One Size Does Not Fit All.
SFB/TR 15 Discussion Paper No. 407
This paper identifies a new reason for giving preferences to the disadvantaged using a model of
contests. There are two forces at work: the effort effect working against giving preferences and the
selection e¤ect working for them. When education is costly and easy to obtain (as in the U.S.),
the selection effect dominates. When education is heavily subsidized and limited in supply (as in
India), preferences are welfare reducing. The model also shows that unequal treatment of identical
agents can be welfare improving, providing insights into when the counterintuitive policy of rationing
educational access to some subgroups is welfare improving.