Should college admissions favor low-income applicants?

2022-02-08

We document that low-income students outperform high-income students in college after controlling for admission scores in Brazil. This fact suggests that income-based affirmative action policies might be not only welfare increasing but also efficient. We construct an overlapping-generations model in which parents choose how much to invest in their child’s education, increasing both human capital and the likelihood of college admission. Affirmative action improves the pool of admitted students, but it distorts incentives towards educational investments. Using the model at calibrated parameters, we quantify the long-run effects of optimal income-based affirmative action policies.