Coate–Loury model

The Coate–Loury model of affirmative action was developed by Stephen Coate and Glenn Loury in 1993. The model seeks to answer the question of whether, by mandating expanded opportunities for minorities in the present, these policies are rendered unnecessary in the future. Affirmative action may lead to one of two outcomes:

1. By improving employers’ perceptions of minorities or improving minorities’ skills, or both, affirmative action policies would eventually cause employers to want to hire minorities regardless of the presence of affirmative action policies.
2. By dampening incentives for minorities, affirmative action policies would reduce minority skill investment, thus leading to an equilibrium where employers correctly believe minorities to be less productive than majorities, thus perpetuating the need for affirmative action in order to achieve parity in the labor market.

Coate and Loury concluded that either equilibrium is possible under certain assumptions.