The University of California recently suspended through 2024 the requirement that California applicants submit SAT scores, upending the major role standardized testing has played in college admissions. We study the impact of this decision and its interplay with other policies (such as affirmative action) on admitted class composition. We develop a market model with schools and students. Students have an unobserved true skill level, a potentially observed demographic group membership, and an observed application with both test scores and other features. Bayesian schools optimize the dual-objectives of admitting (1) the "most qualified" and (2) a "diverse" cohort. They estimate each applicant's true skill level using the observed features and potentially their group membership, and then admit students with or without affirmative action. We show that dropping test scores may exacerbate disparities by decreasing the amount of information available for each applicant. However, if there are substantial barriers to testing, removing the test improves both academic merit and diversity by increasing the size of the applicant pool. We also find that affirmative action alongside using group membership in skill estimation is an effective strategy with respect to the dual-objective. Findings are validated with calibrated simulations using cross-national testing data.

We estimate a model of a college admissions contest with affirmative action (AA) where students compete for seats at better schools by choosing pre-college human capital (HC) investments. We are able to identify and flexibly estimate the contest structure in the college admissions market, including the tendency for AA to affect admissions profiles on different segments of the US college quality spectrum. We identify the effects of college quality, pre-college HC, and unobserved student characteristics on post-college income using a control function derived using methods from the auctions literature. College quality is the primary income determinant, while unobserved student characteristics play a secondary role. Pre-college HC affects income indirectly through its influence on graduation probability and enrollment. We also estimate the fraction of pre-college HC “wasted” by the rat-race nature of the admissions contest, and run counterfactuals of admissions, graduation rates, and post-college income race gaps under alternate admissions schemes not observed in the data.

Affirmative action policies provide a balance between meritocracy and equity in a wide variety of real-life resource allocation problems. We study choice rules where meritocracy is attained by prioritizing individuals based on merit, and equity is attained by reserving positions for target groups of disadvantaged individuals. Focusing on overlapping reserves, the case where an individual can belong to multiple target groups, we characterize choice rules that satisfy maximal compliance with reservations, elimination of justified envy, and non-wastefulness. When an individual accommodates only one of the reserved positions, the horizontal envelope choice rule is the only rule to satisfy these three axioms. When an individual accommodates each of the reserved positions she qualifies for, there are complementarities between individuals. Under this alternative convention, and assuming there are only two target groups, such as women and minorities, paired-admissions choice rules are the only ones to satisfy the three axioms. Building on these results, we provide improved mechanisms for implementing a variety of recent reforms, including the 2015 school choice reform in Chile and 2012 college admissions reform in Brazil.