Abstract: The paper analyzes different selection policies in education and business.We show that incorrect self-perceptions combined with imperfect performance measurement may cause significant welfare losses in selective educational systems, in particular if selection starts too early. Of course, these welfare losses can be mitigated by an investment in better ability assessment. However, an affirmative action policy could serve the same purpose as such an investment.We apply our analysis also to diversity management in firms. Based on positive discrimination we establish an efficiency argument for diversity management.
Dr. G. Eisenkopf
University of Konstanz
Department of Economics and Thurgau Institute of Economics
Box 131
78457 Konstanz
Germany
e-mail: Gerald.Eisenkopf@uni-konstanz.de
Prof. Dr. C. Lukas
University of Konstanz
Department of Economics
Box 144
78457 Konstanz
Germany
e-mail: Christian.Lukas@uni-konstanz.de
