Identity, Beliefs, and Political Conflict∗

Identity, Beliefs, and Political Conflict Giampaolo Bonomiy, Nicola Gennaiolizand Guido Tabellinix First version: October 2018 This version: July 2020 Abstract We present a theory of identity politics that builds on two ideas. First, when policy conflict renders a certain social divide (economic of cultural) salient, a voter’s beliefs are tainted by the stereotype of the group he identifies with. Second, culture influences beliefs across many domains. The theory yields two main implications: i) voters’beliefs are polarized along the distinctive features of salient groups; ii) cultural change and specific economic shocks can render cultural groups salient, inducing large and non standard changes in beliefs and policies. In particular, shocks concentrating economic losses on social conservative groups (e.g., globalization) can induce voters to switch from class to cultural identity, dampening their demand for redistribution and exacerbating conflict in other social dimensions. We show that U.S. survey evidence is broadly consistent with these implications. We are grateful to Roland Benabou, Ben Enke, Ed Glaeser, Elhanan Helpman, Nathan Nunn, Raffella Piccarreta, Giacomo Ponzetto, Jesse Shapiro, Andrei Shleifer, Marco Tabellini, Pierre Yared and to partic- ipants in workshops at ASREC, Bocconi, the Bundesbank, CEPR, CIFAR, Harvard, the IMF, Honk Kong Baptist University, National Taiwan University, National University of Singapore, CEIBS, the LSE ERINN conference, the NBER, Princeton, UPF, Università Statale di Milano, the University of Namur, and to Viola Corradini, Daniele d’Arienzo, Carlo Medici, Francesca Miserocchi and Giulia Travaglini for outstanding re- search assistance. Tabellini thanks the ERC grant 741643 and Gennaioli the ERC (GA 647782) and MIUR (FARE grant) for financial support. yDepartment of Economics, UC San Diego. E-mail: [email protected] zDepartment of Finance and IGIER, Università Bocconi. E-mail: [email protected] xDepartment of Economics and IGIER, Università Bocconi; CEPR; CESifo. E-mail: [email protected] 1 1 Introduction During the last decades the political systems of advanced democracies have witnessed mo- mentous change. The letf-right divide on redistribution has weakened, and new dimensions of conflict such as immigration and civil rights have emerged. During this period income inequality has increased, so one would have expected the demand for redistribution to soar. By contrast, many poor and less educated voters have moved to the right, while richer and more educated voters have moved to the left (Piketty 2017). The recent populist wave has added another puzzle: these trends are accentuated by adverse economic shocks. In the US, Autor et al. (2017) show that areas exposed to import competition have become more conservative. In Europe, Colantone and Stanig (2017, 2018 a,b) and Anelli et al. (2018) show that areas hurt by free trade or skilled biased technical change have moved toward nationalistic and socially conservative positions. Leading theories of changing political conflict rest on supply mechanisms. In one variant, the driver of change is growing extremism of party platforms, which makes them more distin- guishable on a large set of issues (Fiorina and Abrams 2008, Levendusky 2009). This aspect surely plays a role, but it cannot explain changes in voters’ preferences, in particular why many lower class voters demand less redistribution despite increasing inequality. In another variant, politicians attract voters by catering to their cultural views, and then persuade them on issues they are less interested in or informed about (Zaller 1992, Shleifer and Murphy 2004). This helps clarify persuasion in some domains, but it cannot account why voters hit by adverse economic shocks become more conservative and anti-redistribution. Moreover, supply mechanisms are often country specific, while these political trends have occurred in several countries with very different political systems. This paper offers a demand side theory that emphasizes voters’ social identity and its effect on beliefs. We build on two pillars. First, following the social psychology of identity (Tajfel and Turner 1979, Turner et al. 1987), we assume that when policy conflict renders a certain social partition salient, voters’ beliefs are tainted by the stereotype of the group they identify with. In line with social psychology, we formalize salient groups to be those that face the strongest policy conflict in society, and formalize stereotypes as exaggerating the distinctive features of a group (Bordalo et al. 2016). In this framework, during periods of strong economic conflict voters identify with their income class. Lower class voters become too pessimistic about social mobility and upper class voters too optimistic, which enhances class conflict. When instead cultural conflict between social progressives and social conservatives is strong, voters identify with their cultural group. Cultural views become more extreme, which feeds back into stronger cultural conflict. The second pillar of our analysis is the notion that culture influences beliefs across many domains. Haidt (2012) and Enke et al. (2019b) show that this is true with respect to moral 2 universalism, which captures the extent to which people trust socially distant others and apply their value system to them. Moral universalists are progressive with regard to civil rights or immigration, but also in economic domains: they trust the government more and (hence) are more pro-redistribution. Similarly, Stancheva (2020), shows that cultural traits such as trust in government and fairness norms shape preferences over tax policy. Critically, in our model the effect of these deep seated cultural values is time varying: it is subdued during times of class identity and becomes strong during times of cultural identity. Our analysis shows that the political realignments described at the beginning can be un- derstood as the result of a shift to cultural identity, favored by the increased relevance of issues like civil rights and immigration, but also by economic shocks such as globalization and technology that hit social conservative groups (because they are less educated or live in declining regions). By enhancing the similarity between people with similar culture, and obfuscating differences in income or status, these shocks render salient the conflict between progressive/cosmopolitan voters and conservative/nationalist ones, while dampening tradi- tional redistributive conflict between rich and poor. As voters realign culturally, they form two camps that disagree on almost everything. More generally, by shaping beliefs, endogenous social identities alter the effects of economic and social change. We develop our analysis in three steps. In Section 2 we discuss the psychological founda- tions of identity and present our model of beliefs. We show that cultural identity amplifies actual and perceived polarization across cultural groups. Section 3 endogeneizes voters’identities in a setting with both economic and cultural conflict. Voters can identify with their income class (Upper vs Lower) or their cultural group (Progressive vs Conservative). Shocks that increase: i) the welfare relevance of cultural conflict, for instance a large inflow of immigrants, or ii) the intensity of cultural conflict, such as socially progressive voters becoming more extreme, or iii) economic shocks that increase the correlation between income and social progressiveness, can induce a switch from class to cultural identity. When this occurs, voters’beliefs change in many domains, which influences the policy platforms offered by two opportunistic candidates. The switch to cultural identity causes disagreement to rise over cultural issues but possibly to fall over redistribution, with ambiguous net effects. But there are two key additional effects. First, cultural identity increases the coherence of polarization, boosting the correlation of beliefs across issues. A group of voters is progressive, both socially and economically, another group is conservative in both domains. Under class identity, instead, lower class voters could be socially conservative but still support redistribution, and viceversa for upper class voters. Second, a switch from economic to cultural identity amplifies conflict between cultural groups (eg. religious vs secular), but it may dampen conflict between economic groups (eg. upper vs lower classes). The reason is that cultural identity cuts across economic classes: 3 some poor individuals are conservative, others are progressive. Identification with their class emphasizes what they have in common, being poor, and amplifies conflicts with the rich. Cultural identity has the opposite effect: it enhances differences within the working class, dampening redistributive conflict with the upper class. In Section 5 we show that both predictions are supported by time patterns in the ANES survey data. Section 4 adds a third dimension of heterogeneity, exposure to international trade, besides income and culture. Here individuals can also identify as cosmopolitan or nationalist. We show that trade shocks hitting social conservative strata can drive identity away from class. Indeed, such shocks render cultural differences salient when thinking also about trade conflict. Thus, losers from trade become more socially conservative and demand less redistribution, and viceversa for winners from trade. In Section 5 we show that this prediction too is consistent with the data. Exploiting the CCES survey

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