‘Displaced come from stronger socio-economic backgrounds than displacers’

The data

We collected two data sets. First, we collected a census of all individuals who took the admissions exam in 1996… To better understand outcomes across caste groups, we interviewed about 700 households from this census of applicants between 2004 and 2006 (approximately 8-10 years after the entrance exam). We surveyed both the applicant and their parents to gauge life outcomes including income and occupation, job satisfaction, social networks, and caste identity.

How was it collected?

The enumerators first visited the parents’ recorded address as of 1996 to determine if the parents still lived there. If the parents had moved, the enumerators went door to door and asked the neighbours for contact information… In total, we searched for 1,984 households.

Are quota students from the economically better off sections?

The reservation policy is associated with the admission of individuals of a lower socio-economic background. Under the assumption of a 70 per cent enrolment rate, mean parental income among the displaced individuals is Rs 14,088 compared to Rs 8,340 among the displacing individuals; 41 per cent of displaced individuals come from a household in which the head holds at least a master’s degree, compared to only 14 per cent of displacing individuals; also, 59 per cent of displaced individuals attended an English-language private school, compared to only 35 per cent of displacing individuals.

Do quota students benefit?

Attending engineering college increases the monthly income of upper-caste individuals by between Rs 9,500 and Rs 13,000 (statistically significant in all four specifications); in contrast, attending engineering college increases the monthly income of lower-caste applicants by between Rs 5,500 and Rs 6,200 (statistically significant in all four specifications). Hence, the estimates… paint a less favourable picture of the welfare implications of the reservation policy: attending engineering college increases the monthly income of an upper-caste candidate by Rs 3,000 to Rs 7,000 more than it increases the monthly income of a lower-caste candidate.

The between-caste difference in the returns to an engineering education is especially large when we compare general-caste applicants to SC applicants… Interestingly, we cannot reject the hypothesis that the returns between the upper-caste group and OBC are the same.

Some conclusions:

Our analysis suggests that the affirmative action policy redistributes resources to minority groups. Contrary to the arguments of some critics, the policy does not merely crowd out economically-disadvantaged upper-caste students to make way for economically-advantaged lower-caste students. The individuals who are displaced by the programme come from stronger socio-economic backgrounds than the displacers. Hence, by targeting disadvantaged caste groups, the policy achieves some income targeting without generating any of the behavioural distortions typically associated with income targeting.

Moreover, despite their low test scores, the marginal admits from lower castes earned significant returns from attending engineering college. In other words, our findings do not support the view that the academic resources that are devoted to the lower-caste students are totally wasted on them.

The full text of the report is available online at nber.org/papers/w13926