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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.

AbstractHow does engagement with markets affect socioeconomic values and political preferences? A long line of thinkers has debated the nature and direction of such effects, but claims are difficult to assess empirically because market engagement is endogenous. We designed a large field experiment to evaluate the impact of financial markets, which have grown dramatically in recent decades. Participants from a national sample in England received substantial sums they could invest over a 6‐week period. We assigned them into several treatments designed to distinguish between different theoretical channels of influence. Results show that investment in stocks led to a more right‐leaning outlook on issues such as merit and deservingness, personal responsibility, and equality. Subjects also shifted to the right on policy questions. These results appear to be driven by growing familiarity with, and decreasing distrust of markets. The spread of financial markets thus has important and underappreciated political ramifications.

When do ethnic cleavages increase the risk of conflict? Under what conditions is a strong common identity likely to emerge, thereby reducing that risk? How are patterns of social identification shaped by conflict? We draw on empirical results regarding the nature and determinants of group identification to develop a simple model that addresses these questions. The model highlights the possibility of vicious and virtuous cycles where conflict and identification patterns reinforce each other. It also shows how processes of ethnic identification amplify the importance of political institutions and traces the effects of national status and perceived differences across ethnic groups. Finally, we demonstrate how a small but sufficiently potent group of ethnic radicals can derail a peaceful equilibrium, leading to the polarization of the entire population. We reexamine several historical cases as well as empirical correlates of civil wars in light of these results.