Many countries mandate affirmative action in university admissions for traditionally disadvantaged groups. Little is known about either the efficacy or costs of these programmes. This paper examines affirmative action in engineering colleges in India for “lower-caste” groups.

The authors argue that such action successfully targets the financially disadvantaged: the marginal upper-caste applicant comes from a more advantaged background than the marginal lower-caste applicant who displaces him. Despite much lower entrance exam scores, the marginal lower-caste entrant does benefit: a strong, positive economic return to admission is revealed through the findings. These findings contradict common arguments against affirmative action: that it is only relevant for richer lower-caste members, or that those who are admitted are too unprepared to benefit from the education. However, these benefits come at a cost.

The findings also illustrate the programme’s redistributive nature: it benefits the poor, but costs resources in absolute terms. One reason for this lower level gain is that a smaller fraction of lower-caste admits end up employed in engineering or advanced technical jobs. Finally, the authors find no evidence that the marginal upper-caste applicant who is rejected due to the policy ends up with more negative attitudes towards lower castes or towards affirmative action programmes. On the other hand, there is some weak evidence that the marginal lower-caste admits become stronger supporters of affirmative action programmes