A key question concerning affirmative action is whether the labor-market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market. We argue that this depends on how the policy affects employers' beliefs about the productivity of minority workers. We study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments. We prove that, even when identifiable groups are equally endowed ex ante, affirmative action can bring about a situation in which employers (correctly) perceive the groups to be unequally productive, ex post.

This paper analyzes the economic role and performance of a type of financial institution which is observed worldwide: rotating savings and credit associations (Roscas). Using a model in which individuals save for an indivisible durable consumption good, we study Roscas which distribute funds using random allocation and bidding. Each type of Roscas allows individuals without access to credit markets to improve their welfare, but under a reasonable assumption on preferences, random allocation is preferred when individuals have identical tastes. This conclusion need not hold when individuals are heterogeneous. We also discuss the sustainability of Roscas given the possibility of default.