This paper provides a simple explanation for why some minority groups are economically successful, despite being subject to government-mandated discriminatory policies. We study an economy with private and public sectors in which workers invest in imperfectly observable skills that are important...

This chapter surveys the theoretical literature on statistical discrimination and affirmative action. This literature suggests different explanations for the existence and persistence of group inequality. This survey highlights such differences and describes in these contexts the effects of...

We argue that once we take into account the students’ rational enrollment decisions, mismatch in the sense that the intended beneficiaries of affirmative action admission policies are made worse off ex ante can only occur if selective universities possess private information. Ex ante mismatch...