Can affirmative action policies be inefficiently persistent?

Philippe Jehiel () and Mathieu V. Leduc

European Economic Review, 2024, vol. 166, issue C

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.

Keywords: Affirmative action; General equilibrium; Loss aversion; Prospect theory; Moral hazard; Game theory; Tragedy of the commons (search for similar items in EconPapers)
JEL-codes: D40 I28 I30 J15 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Can affirmative action policies be inefficiently persistent? (2024)
Working Paper: Can affirmative action policies be inefficiently persistent? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:166:y:2024:i:c:s0014292124000837

DOI: 10.1016/j.euroecorev.2024.104754

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