Does reservation help?

Using someone else's (Surjit Bhalla) column name for the heading of yet anther person's (TCA Srinivasa-Raghavan is off for two weeks sunning himself in Gurgaon, where he lives) regular Okonomos slot is, perhaps, not the best thing to do, but nothing describes the government's policy on reservations for the disadvantaged in jobs and in educational institutes better than this.

Since I haven't been able to find any robust papers using relevant data on India, here's a summary of some papers from the National Bureau of Economic Research on the subject.

Card and Krueger use confidential micro data from the population of SAT-takers in these two states between 1994 and 2001 (to get a good feeling of the "before" and "after"). First, they found that while there was a sharp drop in the admissions in the elite campuses like Berkeley and the UCLA, the overall drop in the state was hardly significant -- that is, the minorities got admissions to other colleges in the state.

So, if there were good quality government-run or aided colleges, the issue of reservations in unaided colleges/schools in India wouldn't even be an issue.

Another paper, by Roland G Fryer Jr and Glenn C Loury** is more broad brush and reviews a lot of the literature on the impact of affirmative action.

One paper it reviews, for instance, finds evidence to show that when two groups of similar whites were asked for their views on blacks, the group to whom affirmative action was mentioned tended to affirm negative racial stereotypes like blacks are mostly lazy, the other group to whom affirmative action was not mentioned tended to have less extreme views.

Another study reviewed by the duo is even more interesting. It shows that when there is a modest goal of affirmative action (like, say, a 5 per cent reservation) there is a tendency for minorities to invest more in education since only the most qualified of them will get jobs.

If, however, the goal is a lot more aggressive, the minorities know their chances of getting a job are higher and so invest less in bettering their skills. An important policy conclusion for those in government here. The authors call this outcome a patronising equilibrium.

* Would the elimination of affirmative action affect highly qualified minority applicants?; NBER Working paper 10366