A Model of Social Identity with an Application to Political Economy: Nation, Class, and Redistribution

Abstract

This article develops a model for analyzing social identity and applies it to the political economy of income redistribution, focusing on class and national identities. The model attempts to distill major findings in social psychology into a parsimonious statement of what it means to identify with a group and what factors determine the groups with whom people identify. It then proposes an equilibrium concept where both identities and behavior are endogenously determined. Applying this model to redistribution helps explain three empirical patterns in modern democracies. First, national identification is more common among the poor than among the rich. Second, national identification tends to reduce support for redistribution. Third, across democracies there is a strong negative relationship between the prevalence of national identification and the level of redistribution. The model further points to national eminence, national threats, and diversity within the lower class as factors that can reduce redistribution.