What determines public support for affirmative action?

• Author: Iyigun, Murat F.

Despite widespread recognition of the value of diversity, efforts to increase the number of minority professionals through race-sensitive admissions policies have never been fully accepted. As the competition to enter leading colleges and professional schools continued to intensify, this opposition became more vocal ... The U.S. economy is assigning more and more value to higher education as preparation for success in the workplace. As a result, the incentive to finish college is becoming stronger. This is surely one reason why the debate over who gains admission to the most selective schools has become so heated.

--from The Shape of the River, by W. G. Bowen and D. Bok (1998, pp. 13, 69) [emphasis added]

1. Introduction

Affirmative action, which came into effect in the United States in the late 1960s with the intent to eliminate racial, ethnic, and gender differences in access to economic opportunity, has arguably been one of the most contentious public policies implemented. (1) Although the civil rights struggle of the 1960s shifted public opinion in favor of affirmative action, opposition to such policies remained relatively high throughout the late 1960s and the 1970s. The Supreme Court's ruling on the 1978 Bakke v. the University of Ca1ifornia case, which prohibited the use of strict quotas but allowed the lawful consideration of race, gender, and ethnicity in college admissions, settled the issue temporarily--at least from a legal standpoint. In the 1990s, however, stronger opposition to affirmative action and the subsequent elimination in some states of such policies for college admissions, public procurement, and employment helped bring affirmative action to the forefront of the public policy forum once again. (2)

The three decades during which affirmative action policies were in effect also canvas a period with potentially relevant changes in academic trends and labor market outcomes: First, the disparity in the scores of Black and White takers of the Scholastic Assessment Tests narrowed fairly steadily between the mid-1970s and the late 1980s and held relatively steady thereafter. (3) In contrast, the disparity between Blacks and Whites with regard to job performance and labor productivity remained persistently and significantly lower than differences between Blacks and Whites with regard to average test scores during the whole period. (4) Second, after rising in the 1960s and declining in the 1970s, the returns to education, as well as other components of skill, started to increase rapidly in the early 1980s. In fact, the returns to education soared so impressively during the 1980s and the early 1990s that in 1994 it stood at roughly 35% above its value in 1963 (see Figure 1). Moreover, between the late 1970s and th e mid-1980s, when the return to education, experience, and other components of unobservable skill were rising, the increase in the education premium outpaced that in the returns to experience and other components of skill. (5)

For the most part, the debate about affirmative action revolves around assessing whether the impact and success of affirmative action policies to date justify their existence. But this debate also raises intriguing questions from a political economy standpoint. Why has political support for such policies begun to erode more rapidly in the 1990s? If indeed there are biases in screening, what role do they play in the political economy of affirmative action? And, more specifically, how are recent trends in public support for affirmative action linked to increases in the education premium and reductions in the test score gap in the last two decades?

In this paper, we present a political economy model of tax-financed public education. In the model, investment in education is indivisible, and as a result, demand for education can exceed its supply. Thus, a screening mechanism--such as a standardized test--is required for allocation. These tests can most accurately measure cognitive skills, but labor productivity depends on these skills as well as other immeasurable traits. In any given period, a majority vote determines the supply of education as well as whether to enact affirmative action policies. When voting, parents take into account not only the effect affirmative action has on the odds of admission of their own offspring, but also the social benefits of instituting these policies.

What are the potential social benefits of affirmative action? For one, to the extent that the majority and the minority are more similar in immeasurable traits than in measurable characteristics such that a selection system bias exists, affirmative action policies help to improve the efficiency of educational allocation. (6) Second, empirical and anecdotal evidence indicates that greater social diversity in access to education and employment generates aggregate economic benefits. (7) It is also clear that such social diversity can be achieved only through the maintenance of at least some degree of equal opportunity. In racially, ethnically, or culturally diverse societies, the benefits of diversity arise because greater representation of minorities in government, business, and the professions helps to produce more enlightened public policies and corporate choices. Moreover, for diverse societies to remain peaceful and economically efficient, access to economic opportunities and rewards need to be perceived to be open to all members of a society. (8)

Our results indicate that for a given amount of spending on public education, affirmative action policies may have two effects: First, they lower the odds of admission to a public school for applicants from majority households. Second, they alleviate the negative effect of the selection system bias on the allocation of education. Because of both these effects, changes in the returns to education as well as the relative test score distributions of the majority and the minority potentially affect the majority's political support for affirmative action. In periods in which the education premium is relatively low, the matching efficiency gains provided by affirmative action are relatively high compared with the opportunity cost of not acquiring education, and the majority supports affirmative action. In periods in which the returns to education are high, the majority's support for affirmative action declines as the opportunity cost of remaining uneducated increases relative to the matching efficiency gains provid ed by affirmative action policies. In contrast, changes in the test score gap have offsetting effects on the majority: On the one hand, a higher majority-minority test score gap suggests that the social benefits of affirmative action would be large. On the other hand, the institution of affirmative action policies would displace a number of the majority's offspring from the ranks of the college educated. Thus, in general, changes in the test score gap have ambiguous effects on the majority's political desire to support affirmative action. Nonetheless, for a sufficiently high test score gap, the social benefits of affirmative action outweigh the majority's utility cost of displacement from college such that they support affirmative action.

Two issues are noteworthy at the outset: First, although we identify returns to education as an important determinant of affirmative action policies, we do not claim that economic factors alone-- without reliance on sociological or cultural ones--can explain changes in the support for affirmative action. For example, one could argue that biases in screening for education and employment have been significantly reduced in the last three decades because of the Civil Rights Act and therefore that scaling back affirmative action policies is warranted. We do not take a position on this or any other similar argument. Rather, our sole intent is to explore the effects, if any, of economic factors on the determination and scope of affirmative action. Second, although the sole focus of this paper is affirmative action in higher education, it would be straightforward to extend this model to include affirmative action in employment. As will become apparent below, equilibrium affirmative action policies in education and em ployment should be perfectly correlated when such policies in education are based on the votes of a majority who take into account the private costs and benefits of affirmative action. In that context, the full benefits of affirmative action in education cannot accrue with continued biases in the labor market.

2. Related Literature

By design, this paper brings together the existing literature on public education and that on affirmative action. Fernandez and Rogerson (1995) examine political support for tertiary education. They do not consider the role of tests in the political economy outcomes but instead focus on subsidies whose sizes are determined by majority vote. Fernandez (1998) and Fernandez and Gali (1999) explore the role borrowing constraints play in the performance of exams versus that of markets as allocative mechanisms. In a model in which agents who differ in their initial wealth and ability are assigned to various investment opportunities or schools of various qualities, these authors show that exams dominate markets in terms of aggregate output. For sufficiently powerful (less-biased) exam technologies, exams are superior to markets in terms of aggregate consumption as well. Glomm and Ravikumar (1992) compare the income distribution and growth implications of public education with those of private education. Their model is one in which all agents in the economy demand educational services to various degrees and the quality of educational services depends on the total resources allocated to education. Glomm and Ravikumar find that private education, which will be chosen by higher-income individuals, results in less subsequent mobility but higher growth rates. In...