An Information Theory of Efficient Differential Treatment
American Economic Journal: Microeconomics
vol. 15,
no. 1, February 2023
(pp. 323-58)
Abstract
When are differential treatment policies—such as preferential treatment, affirmative action, and gender equity policies—justified by efficiency concerns? I propose a nonparametric assignment model where a policymaker assigns agents to different treatments or positions to maximize total surplus, based on the agents' characteristics and noisy information about their types. I provide necessary and sufficient conditions on the agents' signal structures, which characterize whether surplus maximization requires differential treatment or not, and study how the bias and informativeness of signal structures determine the efficiency implications of differential treatment. I examine implications of this model for inequality, decentralization, and empirical work.Citation
Temnyalov, Emil. 2023. "An Information Theory of Efficient Differential Treatment." American Economic Journal: Microeconomics, 15 (1): 323-58. DOI: 10.1257/mic.20200400Additional Materials
JEL Classification
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- I23 Higher Education; Research Institutions
- I24 Education and Inequality
- J71 Labor Discrimination
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