We introduce a model of two-sided statistical discrimination in which worker and firm beliefs are complementary. Firms try to infer whether workers have made investments required for them to be productive, and simultaneously, workers try to deduce whether firms have made investments necessary...

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...

The extent to which discrimination can explain racial wage gaps is one of the most divisive subjects in the social sciences. Using a newly available dataset, this paper develops a simple empirical test which, under plausible conditions, provides a lower bound on the extent of discrimination in...

The extent to which discrimination can explain racial wage gaps is one of the most divisive subjects in the social sciences. Using a newly available dataset, this paper develops a simple empirical test which, under plausible conditions, provides a lower bound on the extent of discrimination in...

This paper presents a conceptual framework for understanding the consequences of the widespread adoption of race-neutral alternatives' to conventional racial affirmative action policies in college admissions. A simple model of applicant competition with endogenous effort is utilized to show...

The literature on statistical discrimination shows that ex-ante identical groups may be differentially treated in discriminatory equilibria. This paper constructs a dynamic model of statistical discrimination and explores what happens to the individuals who nonetheless overcome the initial...

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...