Abstract:We model a hitherto unexplored facet of affirmative action – its effect on a country’s competitiveness in international labor markets. We show how affirmative action, or merely the announcement of an affirmative action policy, can lead to large overall losses for a country, including losses for both the protected and non-protected groups, by affecting the country’s ability to participate in the global workplace. It destroys rather than creates opportunities for the target group members and can lead to the folding up of the top-tier colleges in a country and to the migration of skilled industry elsewhere.