AFFIRMATIVE ACTION AND HUMAN CAPITAL INVESTMENT: THEORY AND EVIDENCE FROM A RANDOMIZED FIELD EXPERIMENT

Abstract. Pre-College human capital investment occurs within a competitive environ-ment and depends on market incentives created by Affirmative Action (AA) in college admissions. These policies affect mechanisms for rank-order allocation of college seats, and alter the relative competition between blacks and whites. We present a theory of AA in university admissions, showing how the effects of AA on human capital investment differ by student ability and demographic group. We then conduct a field experiment designed to mimic important aspects of competitive investment prior to the college mar-ket. We pay students based on relative performance on a mathematics exam in order to test the incentive effects of AA, and track study efforts on an online mathematics web-site. Consistent with theory, AA increases average human capital investment and exam performance for the majority of disadvantaged students targeted by the policy, by mitigat-ing so-called "discouragement effects. " The experimental evidence suggests that AA can promote greater equality of market outcomes and narrow achievement gaps at the sam