Shifting Competition, Affirmative Action, and Human Capital Accumulation : A Comparative Static Analysis of Investment Contests

We analyze a theoretical model in which many heterogeneous agents invest in productive human capital as they compete for better college seats or employment opportunities. We derive theoretical predictions about how intensity of market competition and/or preferential treatment allocation policies change the distribution of effort and human capital accumulation across different population groups. Our main results highlight how Spence-like incentives still play a significant role in many important market settings with dominant Beckerian incentives, where effort produces intrinsically valuable human capital. We show that the findings are robust to a range of assumptions, and discuss policy implications of these results