"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...

For more than three decades, critics and supporters of affirmative action have fought for the moral high ground -- through ballot initiatives and lawsuits, in state legislatures, and in varied courts of public opinion. The goal of this paper is to show the clarifying power of economic reasoning...