AFFIRMATIVE ACTION AND THE UTILIZATION OF MINORITY- AND WOMEN-OWNED BUSINESSES IN HIGHWAY PROCUREMENT

The Federal Highway Administration (FHWA) mandates states' use of affirmative action when awarding federally funded road construction projects. Here I document the effectiveness of this program in increasing purchases from disadvantaged business enterprises (DBEs). Higher goals for the utilization of DBEs, both across states over time and across projects within California, is associated with a greater share of contract dollars awarded to DBEs. This effect is concentrated among minority-owned firms and is stronger when goals are more likely to be binding and in states with an apparently stricter enforcement regime.