The Optimal Timing of Affirmative Action∗

When should the government intervene to fulfil affirmative action goals? This paper addresses this question in a dynamic model of education and employment. We compare the effects of implementing affirmative action in university admissions and labor market hiring. The informational advantage of selective universities over the firms regarding the quality of the students’ grade schools is identified as an important consideration in favor of affirmative action in the university admission stage. The intuition is that selective universities can use the information advantage to sift through the previously rejected minority students and identify those who are most likely to succeed if admitted. This information advantage is inversely related to the difference between high and low quality grade schools. Another important determinant of the optimal timing is the differences in the firms’ and the selective universities’ misallocation costs.