Inequality and identity salience

Ghatak, Maitreesh ORCID: 0000-0002-0126-0897 and Verdier, Thierry (2023) Inequality and identity salience. Indian Economic Review, 58 (1 supplement). 181 - 191. ISSN 0019-4670

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Abstract

This paper provides a simple model of identity salience that is applied to the phenomenon of the recent rise in right-wing populism in the Western world. Trade and capital flows, skill-biased technological change, and migration have led to declining employment and wages in these economies and a parallel rise in economic and cultural populism, tapping into nativist sentiments. We argue that when long-term income stagnation for most of the population and decline for some go together with high rates of income growth at the very top, one has zero-sum economics and that naturally raises the possibility of using various kinds of social identities to claim a bigger share of a fixed sized pie. We show that in ethnically or racially polarized societies this naturally leads to the salience of social identities that enable majority ethnic groups to vote for policies that exclude minority groups so that they get a greater share of a dwindling surplus. In contrast, in more ethnically and racially homogeneous societies, this would instead lead to the demand for more pro-redistribution policies that involve greater provision of public goods.

Item Type:	Article
Additional Information:	© 2023 The Authors
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences
JEL classification:	D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs P - Economic Systems > P1 - Capitalist Systems > P16 - Political Economy
Date Deposited:	07 Mar 2023 16:33
Last Modified:	18 Nov 2024 18:27
URI:	http://eprints.lse.ac.uk/id/eprint/118360

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