Group design with endogenous associations

The belief that people are affected by the groups in which they are active has long led policy makers to manipulate the groups to which people are exposed. This paper studies the optimal design of groups to maximize racial and ethnic integration. We show that the group composition that maximizes integration of associations depends critically on the strength of homophily in an intuitive way. We use data on associations among high school students to measure actual integration. We find that non-Hispanics and Hispanics integrate even in groups that are heavily mixed, but that non-blacks do not integrate with blacks until most of a group is black. Consequently, schools with even mixes of Hispanics and non-Hispanics maximize ethnic integration, whereas integration of non-blacks and blacks is maximized with relatively uneven distributions of blacks and non-blacks (i.e. in groups that appear not to be very integrated at all).