Inequality and identity salience

Maitreesh Ghatak and Thierry Verdier
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Maitreesh Ghatak: LSE - London School of Economics and Political Science
Thierry Verdier: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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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.

Keywords: Inequality; Identity; Welfare state; Bargaining (search for similar items in EconPapers)
Date: 2023-07
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Published in Indian Economic Review, 2023, 58 (S1), pp.181-191. ⟨10.1007/s41775-023-00164-1⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04816033

DOI: 10.1007/s41775-023-00164-1

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