NBER Working Papers by Glenn Loury

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Working Papers

December 2010Valuing Identity
with Roland G. Fryer, Jr.: w16568
Affirmative action policies are practiced around the world. This paper explores the welfare economics of such policies. A model is proposed where heterogeneous agents, distinguished by skill level and social identity, compete for positions in a hierarchy. The problem of designing an efficient policy to raise the status in this competition of a disadvantaged identity group is considered. We show that: (i) when agent identity is fully visible and contractible (sightedness), efficient policy grants preferred access to positions, but offers no direct assistance for acquiring skills; and, (ii) when identity is not contractible (blindness), efficient policy provides universal subsidies when the fraction of the disadvantaged group at the development margin is larger then their mean (across positi...
July 2005Affirmative Action and Its Mythology
with Roland G. Fryer, Jr.: w11464
For more than three decades, critics and supporters of affirmative action have fought for the moral high ground ­ through ballot initiatives and lawsuits, in state legislatures, and in varied courts of public opinion. The goal of this paper is to show the clarifying power of economic reasoning to dispel some myths and misconceptions in the racial affirmative action debates. We enumerate seven commonly held (but mistaken) views one often encounters in the folklore about affirmative action (affirmative action may involve goals and timelines, but definitely not quotas, e.g.). Simple economic arguments reveal these seven views to be more myth than fact.
November 2003Categorical Redistribution in Winner-Take-All Markets
with Roland G. Fryer: w10104
This paper constructs a simple model of pair-wise tournament competition to investigate categorical redistribution in winner-take-all markets. We consider two forms of redistribution: category-sighted, where employers are allowed to use categorical information in pursuit of their redistributive goals; and category-blind, where they are not. It is shown that the equilibrium category-sighted redistribution scheme involves a constant handicap given to agents in the disadvantaged category. Equilibrium category-blind redistribution creates a unique semi-separating equilibrium in which a large pool of contestants exerts zero effort, and this pool is increasing in the aggressiveness of the redistribution goal.
Color-Blind Affirmative Action
with Roland Fryer, Tolga Yuret: w10103
This paper presents a conceptual framework for understanding the consequences of the widespread adoption of race-neutral alternatives' to conventional racial affirmative action policies in college admissions. A simple model of applicant competition with endogenous effort is utilized to show that, in comparison to color-conscious affirmative action, these color-blind alternatives can significantly lower the efficiency of the student selection process in equilibrium. We examine data on matriculates at several selective colleges and universities to estimate the magnitudes involved. It is shown that the short-run efficiency losses of implementing color-blind affirmative action (in our sample) are four to five times as high as color-conscious affirmative action.

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