NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Identity Politics and Trade Policy

Gene M. Grossman, Elhanan Helpman

NBER Working Paper No. 25348
Issued in December 2018
NBER Program(s):The International Trade and Investment Program, The Political Economy Program

We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individual draws from the status of groups with which she identifies and a dissonance cost she bears from identifying with those that are different from herself. In this framework, changes in social identification patterns that may result, for example, from increased income inequality or heightened racial and ethnic tensions, lead to pronounced changes in trade policy. We analyze the nature of these policy changes.

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Document Object Identifier (DOI): 10.3386/w25348

 
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