National Identity and Modern Economic Performance; Stergios Skaperdas (UC Irvine)

ABSTRACT: Early in their development, modern nation-states typically
have to solve internal conflicts that impede their economic performance.
We argue that, to overcome such conflicts, gain sufficient cohesion,
provide public goods, and grow, national identity plays a central role.
We develop a model in which the population can identify with the nation
or with an alternative identity. In addition to material payoffs,
identity involves psychological payoffs in term of status and social
distance. We show that elites (who always identify with the nation in
the model) have an incentive to commit to political rights of commoners
(who have a choice between the national and the alternative identity).
The higher is the status of national identity, the more commoners
identify with the nation, the lower is conflict, and the greater is the
investment in a public good and the higher is economic growth.
Furthermore, state capacity in addition to national identity is
complementary with public good provision and lower levels of conflict.
Furthermore, we construct an index of National Identity that correlates
with public good provision, lower conflict, and economic growth.