1. Moses Shayo The Hebrew University
A Model of Social Identity with an Application to Political Economy: Nation, Class and Redistribution
Moses Shayo
The Hebrew University

2. Overview of Paper A general framework for modeling social identity
Definition of SI in terms of preferences
Endogenous determination of the groups people identify with
Equilibrium.
Application to political economy of redistribution
National vs. class identification
Evidence: national identification and redistribution

3. Identification with Group
A General Framework
Identification with Group
Individual Behavior
Social Environment
(Aggregate Outcome)

4. Identification with Group
A General Framework
Identification with Group
Individual Behavior
Social Environment
(Aggregate Outcome)
Look for a steady state (Social Identity Equilibrium):
Identification profile consistent with social environment
Social environment determined by individual behavior
Individual behavior consistent with social identification

5. A General Framework Primitives
A set of agents N, each characterized by a list of attributes
A set of social groups (subsets of N)
A set of available actions for each agent (the available options)
a process that aggregates individual actions to a social outcome
The material payoff of each agent
The cognitive distance between every agent and group
The relative status of each group
Functions of the social outcome
(and agents’ attributes)

6. Definition 1: An agent is said to identify with social group J if she:
prefers social outcomes where group J’s status is high to ones where it is low;
prefers social outcomes where her distance from group J is low to ones where it is high.
Captures behavior in Minimal Group Paradigm; public goods experiments; studies of social influence.
Can infer identity using revealed preference.
Observation: group status and perceived distance are also major forces determining which groups people identify with.

7. Definition 2: A Social Identity Equilibrium (SIE) is a profile of actions (an action for each agent) and a profile of social identities (an identity for each agent) such that for all agents both actions and identities are optimal.
(i) Actions optimal given identities
(ii) Identities consistent with social environment: identify with the group that is most similar to self and has highest status
(iii) Social environment determined by profile of actions via the aggregation process

8. Remarks Identification profile not given (endogenously determined)
If actions do not affect status nor distances => behave like material payoff maximizer.
If actions affect distances => attempt to resemble group (conformity, peer effects); oppose non-prototypical behavior by other group members
Inequality aversion within group
If actions affect ingroup members => altruistic behavior.
But altruism is “particular”: directed only at ingroup members.
May even incur a cost to reduce welfare of outgroup members if this sufficiently enhances ingroup status.
Evidence: Minimal Group studies, Public Goods experiments, Conformity studies (see appendix in paper).

9. Application to Political Economy Of Redistribution
Standard median-voter model
except people may vote their identity – not just their economic self-interest
Three social groups: Poor, Rich, Nation
“poor” are the majority
Similarity to group higher if common attributes more salient
Group status affected by group members’ after tax income
Status of Poor class increases with redistribution
Status of nation may increase or decrease with redistribution (or be largely unrelated to redistributive policies)
If the poor identify as poor, they support higher tax rate than if they identify with nation: tP>tN

10. Social Identity Equilibria
The poor are the majority: elected tax rate depends on whether they identify with class or nation.
This depends on status and perceived similarities:
Status of Nation relative to status of Poor
Similarity to Poor relative to similarity to Nation
Tax rate tN tP

11. Social Identity Equilibria
The poor are the majority: elected tax rate depends on whether they identify with class or nation.
This depends on status and perceived similarities
Note:
Status of rich class likely to be higher than that of poor class
Similarity to nation likely to be higher among poor
[in modern advanced economies!]
Poor more likely to hold national identity than are rich

12. Social Identity Equilibria
Status of the poor class increases with redistributive taxation (more than national status)
Status of Nation relative to status of Poor
Two possible equilibria
Similarity to Poor relative to similarity to Nation
Tax rate tN tP

13. Perceived Difference from Poor class
Comparative statics
heterogeneity
ethnic diversity that is concentrated at the poorer segments of society
shift of working class in western Europe from socialist to nationalist parties?
“Certainly the most common explanatory factor put forward for the electoral breakthrough of the radical right are immigration and the presence of immigrants” (Schain et al. 2002).
Status of Nation relative to status of Poor
Unique equilibrium
Similarity to Poor relative to similarity to Nation
Tax rate tN tP

14. Perceived similarity to Nation
Comparative statics
salient international competition/conflict
a common threat
“As Americans we are absolutely united, all of us. There are no Democrats, there are no Republicans. As Americans we are united in our determination to destroy, capture, kill Osama bin Laden”
(John Kerry, 10/2004)
Status of Nation relative to status of Poor
Unique equilibrium
Similarity to Poor relative to similarity to Nation
Tax rate tN tP

15. Perceived similarity to Class
Comparative statics
salient class divisions
“I’m not worried about CEOs… the oil companies.. the drug companies… I'm worried about the family that's trying to figure out how they can save for their child's college education. I'm worried about the single mom that doesn't have health insurance. I'm worried about the guy who's worked in a plant for 20 years and suddenly sees his job shipped overseas. That's who I'm worried about. That's who I'm going to be fighting for.”
(Barack Obama, 10/2008)
Status of Nation relative to status of Poor
Unique equilibrium
Similarity to Poor relative to similarity to Nation
Tax rate tN tP

16. National status Tax rate tN tP Comparative statics
Status of Nation relative to status of Poor
“when I took office, I felt very strongly that our government had grown too officious and imposing too much on the private sector in our society… I wanted to see if the American people couldn't get back that pride, and that patriotism, that confidence, that they had in our system. And I think they have.”
(Ronald Reagan)
Similarity to Poor relative to similarity to Nation
Reagan to Barbara Walters, quoted in The New York Times, June 6, 2004.
Tax rate tN tP

17. National status Tax rate tN tP Comparative statics
Status of Nation relative to status of Poor
Similarity to Poor relative to similarity to Nation
Hurricane Katrina
Sep 8th From The Economist print edition
EVEN America's many enemies around the world tend to accord it respect. It might be arrogant, overbearing and insensitive—but, by God, it can get things done.
Since Hurricane Katrina, the world's view of America has changed. The disaster has exposed some shocking truths about the place: the bitterness of its sharp racial divide, the abandonment of the dispossessed, the weakness of critical infrastructure. But the most astonishing and most shaming revelation has been of its government's failure to bring succour to its people at their time of greatest need.
The Economist, September 8, 2005
Tax rate tN tP

18. National status Tax rate tN tP Comparative statics
Status of Nation relative to status of Poor
Similarity to Poor relative to similarity to Nation
(This is actually a week before Lehman collapsed).
The New Yorker, September 8, 2008
Tax rate tN tP

19. Effect of pre-tax inequality
Comparative statics
Status of Nation relative to status of Poor
Ambiguous:
As inequality rises, poor want more redistribution under any given identity
They are also less similar to their fellow nationals
But relative status of poor diminished: could shift away from class identification.
Similarity to Poor relative to similarity to Nation
Tax rate tN tP

20. History matters… Tax rate tN tP
Countries with similar institutional and economic characteristics can nonetheless have very different redistributive regimes
Low tax
low status of poor class
national identification
low tax
Status of Nation relative to status of Poor
Similarity to Poor relative to similarity to Nation
High tax
high status of poor
class identification
high tax
Tax rate tN tP

21. Empirical Predictions
Support for redistribution is decreasing with national identification.
Poor are more likely to identify with their nation.
Democracies exhibit a negative correlation between levels of national identification and levels of redistribution.
(The analogous predictions regarding class identification are somewhat trivial).

22. Data Focus: ISSP 1995: National Identity
Micro data, detailed national identification questions
World Values Survey, waves 1-3 (1981, 1990, 1995)
Micro data for waves 2-3 (no reliable income data for first wave)
Cruder measure of national identification
Preference for redistribution.
Luxemburg Income Study (Milanovic 2000)
Income distribution: pre-tax and post-tax.
Focus:
Democracies
Polity IV combined score > 5
National-identification rather than class-identification
Data availability
More contentious/interesting

23. Empirical Predictions
Support for redistribution is decreasing with income and with national identification.
Poor are more likely to identify with their nation.
Democracies exhibit a negative correlation between levels of national identification and levels of redistribution

24. Variables Measuring Social Identity
Definition 1: An agent is said to identify with social group J if she:
prefers social outcomes where group J’s status is high to ones where it is low;
prefers social outcomes where her distance from group J is low to ones where it is high.
In lab experiments, identification can be inferred from behavior (using revealed preference).

25. Variables Measuring Social Identity
Measuring identification out of the lab
Ellemers et al. (1999): ingroup favoritism captured by questions on commitment to the group (desire to continue acting as a group member)
“I would like to continue working with my group”
“I dislike being a member of my group”
“I would rather belong to the other group”
Klor and Shayo (2008): costly voting for one’s group captured by
“When someone criticizes my group it feels like a personal insult”
“I am proud to be a member of my group”
In both studies, it is not captured by mere self-categorization
“I am similar to other members of my group”
WVS: “How proud are you to be [e.g. French]?”
very proud, quite proud, not very proud, not at all proud.
[No such question on class identity]

26. Variables Household Income
WVS:
Income categories are survey specific (not deciles)
Use only surveys where income categories reported
Regressions control for household size

27. Variables Support for Redistribution
WVS:

28. Variables Support for Redistribution
WVS:
Taxation and transfers designed to make incomes more equal
Trade-off with incentives for effort (deadweight loss of taxation)
Country specific (can’t pool surveys!)
Reverse order in estimation: 10=highest support for redistribution

29. Less than “very proud” “Very proud”
Two regression lines: one for the very proud, one for the rest.
USA 1990 is a rather extreme example – very large effect of national id compared to the effect of income.
“Very proud”

30. Less than “very proud”
“Very proud”
$10, $27,000

31. “Very proud” Less than “very proud”
The other extreme – no clear relation of preferences for redistribution to national id. Typical of less advanced economies.

32. Table 1: Support for Redistribution, Income and National Pride
WVS data. OLS, robust standard errors in parentheses. Each row is a separate regression. Dependent variable is support for redistribution, ranging from 1 (“We need larger income differences as incentives for individual effort”) to 10 (“Incomes should be made more equal”). Reported are the estimated coefficients on log household income, and two dummies for national pride: “very proud” and “quite proud”. Omitted categories are “not proud” and “not at all proud”.
** Denotes significantly different from zero at the 5 % level.
* Denotes significantly different from zero at the 10 % level.
OLS regressions controlling for log of household size, years of schooling, sex & age.

33. Empirical Predictions
Support for redistribution is decreasing with income and with national identification: in most economically advanced democracies.
Poor are more likely to identify with their nation.
Democracies exhibit a negative correlation between levels of national identification and levels of redistribution

34. Empirical Predictions
Support for redistribution is decreasing with income and with national identification: in most economically advanced democracies.
Poor are more likely to identify with their nation.
Democracies exhibit a negative correlation between levels of national identification and levels of redistribution

35. Variables National Identity
International Social Survey Program (ISSP): National Identity, 1995.
How much do you agree or disagree with the following statements?
1. I would rather be a citizen of (R's country) than of any other country in the world.
2. There are some things about (R's country) today that make me feel ashamed of (R's country).
3. The world would be a better place if people from other countries were more like the people in (R's country).
4. Generally (R's country) is a better country than most other countries.
5. When my country does well in international sports, it makes me proud to be citizen of (R's country).
6. (R's country) should follow its own interests, even if this leads to conflicts with other nations.
1. Agree strongly; 2. Agree; 3. Neither agree nor disagree;
4. Disagree; 5. Disagree strongly
Sum up to construct a national identity scale: values in {0,1, 2,…,24} with a higher score representing more nationalist answers.

36. Table 2: National Identification and Income
ISSP 1995 data. OLS, robust standard errors in parentheses. Dependent variable is national identification scale. Each row reports the coefficient on the log of household income from two separate regressions. The regressions in column (1) do not control for years of schooling, while those in column (2) do, with the estimated coefficient reported. Samples do not include non-citizens.
** Denotes significantly different from zero at the 5 % level.
* Denotes significantly different from zero at the 10 % level.
OLS regressions controlling for log of household size, sex & age.

37. Empirical Predictions
Support for redistribution is decreasing with income and with national identification: in most economically advanced democracies.
Poor are more likely to identify with their nation.
Democracies exhibit a negative correlation between levels of national identification and levels of redistribution

38. Variables Redistribution
Need data on both pre-tax and after-tax income.
Luxemburg Income Study (Milanovic, 2000)
Household surveys
Factor income = pre-transfer and pre-tax income, includes wages, income from self-employment, income from ownership of physical and financial capital, and gifts.
Disposable income = factor income + government cash transfers - direct personal taxes and mandatory employee contributions.
Share gain of the bottom quintile = difference between the share of the bottom quintile in factor and disposable income.
Match WVS and ISSP surveys with closest LIS survey
Model: National identification ↔ redistribution
Look only at correlations
In the model both national identification and redistribution are endogenous, and causality runs both ways.

39. National identity scale from ISSP 1995
National identity scale from ISSP Share gain from LIS (Milanovic 2000). A country is a “Democracy” if its combined Polity IV score is at least 6. It is an “Established Democracy” if the number of years since the most recent regime change (Polity IV Regime Durability) is at least 10.

40. Fraction very proud from WVS waves 1-3
Fraction very proud from WVS waves 1-3. Share gain from LIS (Milanovic 2000). A country is a “Democracy” if its combined Polity IV score is at least 6. It is an “Established Democracy” if the number of years since the most recent regime change (Polity IV Regime Durability) is at least 10.

41. WVS - Movements Over Time

42. WVS – Ethnic Diversity
Fraction very proud from WVS waves 1-3. Share gain from LIS (Milanovic 2000). Share of ethnic minorities from Fearon (2003). Countries are divided into high and low share of ethnic minorities according to whether the largest ethnic group comprises at least 75% of the population. The figure shows established democracies only.

43. Conclusion
A general yet parsimonious characterization of social identification
Employ experimental data for micro-foundations
Captures major features of allocation decisions, cooperation, conformity
Apply game-theoretic notion of equilibrium.
May help explain political economy of redistribution, and generate new empirical predictions (and findings).
Framework flexible enough to be applicable to many issues other than redistribution in democracies.