Affirmative action policies are practiced around the world. This paper explores the welfare economics of such policies. A model is proposed where heterogeneous agents, distinguished by skill level and social identity, compete for positions in a hierarchy. The problem of designing an efficient...

Previous literature on statistical discrimination explained stereotypes based on the existence of multiple equilibria, in which principals have different self-confirming beliefs about different social groups (Arrow, 1973; Coate and Loury, 1993). However, the literature has not provided an account of...

Economists have developed theoretical models identifying self-fulfilling expectations as an important source of statistical discrimination in labor markets (Arrow, 1973). The static models dominating the literature of statistical discrimination, however, may leave the false impression that a bad...

Previous studies find that some social groups are stuck in poverty traps because of network effects. However, these studies do not carefully analyze how these groups overcome low human capital investment activities. Unlike previous studies, the model in this paper includes network externalities...

As private education becomes widespread over the last decade in South Korea, the education gap among regions and social classes, noticeably widens. The recent global financial crisis exacerbates the problem as the rich continues to utilize more private education while the poor utilizes it less....