Pre-College human capital investment occurs within a competitive environment 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 market. 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 website. Consistent with theory, AA increases average human capital investment and exam performance for the majority of disadvantaged students targeted by the policy, by mitigating so-called "discouragement effects." The experimental evidence suggests that AA can promote greater equality of market outcomes and narrow achievement gaps at the same time.

This article studies how exclusive social groups shape upward mobility and whether interactions between low- and high-status peers can integrate the top rungs of the economic and social ladders. Our setting is Harvard University in the 1920s and 1930s, where new groups of students arriving on campus encountered a social system centered on exclusive old boys’ clubs. Combining archival and census records, we first show that students from prestigious private feeder schools are overrepresented in old boys’ clubs, while academic high achievers and ethnic minorities are almost completely absent. Club members earnmore than other students and are more likely to work in finance and join country clubs, both characteristic of the era’s elite. We use random variation in room assignment to show that exposure to high-status peers expands gaps in college club membership, adult social club membership, and finance careers by high school type, with large positive effects for private school students and zero or negative effects for others. To conclude, we turn to more recent cohorts. We show that the link between exclusive college clubs and finance careers persists across the twentieth century even as Harvard diversifies, and that elite university students from the highest-income families continue to outearn their peers.