Income-Based Affirmative Action in College Admissions.

This article examines the long-term effects of income-based affirmative action policies in college admissions, focusing on Brazil where such quotas are widely implemented. Using an overlapping-generation model calibrated with Brazilian data, the study finds that these policies improve welfare and aggregate output by admitting more lower- and middle-income students who tend to have higher returns to education, despite some distortion in pre-college educational investments. Optimal income-based affirmative action reduces intergenerational earnings persistence by about 5.7% and benefits nearly 80% of households, although higher-income applicants face increased competition and may oppose such policies. The analysis also evaluates Brazil's existing quota system, concluding that while it promotes social mobility, it could be better designed to enhance welfare and economic efficiency.