POLITICAL ECONOMY: Identity Politics; Professor Guido Tabellini (Bocconi University)

Abstract

We offer a theory of changing dimensions of political polarization based on endogenous social identity. We formalize voter identity as in Bonomi et al. (2021), but add parties that compete on policy and spread stereotypes to persuade voters. Parties are historically connected to different social groups, whose members are more receptive to the party messages. An endogenous switch from class to cultural identity accounts for three major observed changes: i) growing conflict over cultural issues between voters and parties; ii) dampening of redistributive conflict, despite rising inequality; iii) a realignment of lower class voters from the left to the right. The incentive of parties to spread stereotypes is a key driver of identity-based polarization. Using survey data and congressional speeches we show that - consistent with our model - there is evidence of of i) and ii) in the voting realignment induced by the “China Shock” (Autor et. al. 2020).

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