Economics of Culture and Institutions

The NBER's conference on Economics of Culture and Institutions took place April 27 in Cambridge. Research Associates Alberto Bisin of New York University and Paola Giuliano of University of California, Los Angeles organized the meeting. These researchers' papers were presented and discussed:

Nicola Gennaioli, Bocconi University, and Guido Tabellini, IGIER

Identity, Beliefs and Political Conflict

Gennaioli and Tabellini present a theory of identity politics that builds on two ideas. First, voters identify with the social group whose interests are closest to theirs and that features the strongest policy conflict with outgroups. Second, identification causes voters to slant their beliefs toward the group's distinctive opinion. The theory yields two main implications: i) voters' beliefs are polarized and distorted along group boundaries, ii) economic shocks that induce new cleavages to emerge also bring about large changes in beliefs and preferences across many policy issues. In particular, exposure to globalization or cultural changes may induce voters to switch identities, dampening their demand for redistribution and exacerbating conflicts in other social dimensions. The researchers show that survey evidence is consistent with these implications.

Michela Carlana, Harvard University; Alberto F. Alesina, Harvard University and NBER; Eliana La Ferrara, Bocconi University; and Paolo Pinotti, Bocconi University

Revealing Stereotypes: Evidence from Immigrants in Schools (NBER Working Paper No. 25333)

If individuals become aware of their stereotypes, do they change their behavior? Carlana, Alesina, La Ferrara, and Pinotti study this question in the context of teachers' bias in grading immigrants and native children in middle schools. Teachers give lower grades to immigrant students compared to natives who have the same performance on standardized, blindly-graded tests. The researchers then relate differences in grading to teachers' stereotypes, elicited through an Implicit Association Test (IAT). They find that math teachers with stronger stereotypes give lower grades to immigrants compared to natives with the same performance. Literature teachers do not differentially grade immigrants based on their own stereotypes. Finally, the researchers share teachers' own IAT scores with them, randomizing the timing of disclosure around the date on which they assign term grades. All teachers informed of their stereotypes before term grading increase grades assigned to immigrants. Revealing stereotypes may be a powerful intervention to decrease discrimination, but it may also induce a reaction from individuals who were not acting in a biased way.

Ruochen Dai, Peking University; Dilip Mookherjee, Boston University and NBER; Kaivan Munshi, University of Cambridge; and Xiaobo Zhang, Peking University

The Community Origins of Private Enterprise in China

Dai, Mookherjee, Munshi, and Zhang identify and quantify the role played by birth-county-based community networks in the growth of private enterprise in China. The starting point for the analysis is the observation that population density is positively associated with local social interactions, social homogeneity, and enforceable trust in counties (but not cities). This motivates a model of network-based spillovers that predicts how the dynamics of firm entry, concentration, and firm size vary with birth county population density. The predictions of the model are validated over the 1990-2009 period with administrative data covering the universe of registered firms. Competing non-network-based explanations can explain some, but not all of the results. The researchers subsequently estimate the structural parameters of the model and conduct counter-factual simulations, which indicate that entry and capital stock over the 1995-2004 period would have been 40% lower without community networks. Additional counter-factual simulations shed light on misallocation and industrial policy.

David Atkin, Massachusetts Institute of Technology and NBER; Eve Sihra, Hebrew University; and Moses Shayo, Hebrew University

How Do We Choose Our Identity? A Revealed Preference Approach Using Food Consumption (NBER Working Paper No. 25693)

Are identities fungible? How do people come to identify with specific groups? Atkin, Colson-Sihra, and Shayo propose a revealed preference approach, using food consumption to uncover ethnic and religious identity choices in India. They first show that consumption of identity goods (e.g. beef and pork) systematically responds to forces suggested by social-identity research: group status and group salience, with the latter proxied by inter-group conflict. Moreover, identity choices respond to the cost of following the group's prescribed behaviors. The researchers propose and estimate a modified demand system to quantify the identity changes that followed India's 1991 economic reforms. While social-identity research has focused on status and salience, economic costs appear to play a dominant role.

Mathias Iwanowsky, University of Munich, and Andreas Madestam, Stockholm University

State Repression, Exit, and Voice: Living in the Shadow of Cambodia's Killing Fields

How does state repression influence the way citizens exercise political power? Iwanowsky and Madestam address this question using evidence from Khmer Rouge's state-led genocide in Cambodia to estimate the effect of political violence on political behavior. To identify causal effects, they rely on the regime's desire to create an agrarian society, moving forced labor to areas experiencing higher yields. Using rainfall-induced productivity shocks, the researchers show that more people died in the productive areas. Higher productivity under the Khmer Rouge leads to more votes in favor of the opposition over the authoritarian incumbent and increased support for democratic principles four decades later. At the same time, citizens become more cautious in their interactions with the local community as captured by lower participation in community organizations and less trust. The findings are consistent with a model where voice and exit are complements: repression increases people's preferences for opposing views but also makes them more careful in expressing these beliefs. Together the results show that the legacy of state violence can have a persistent effect on society, leading to a more competitive and less personal political environment.

Anke Becker, Harvard University

On the Economic Origins of Constraints on Women's Sexuality

Becker studies the economic origins of customs aimed at constraining female sexuality, such as a particularly invasive form of female genital cutting, restrictions on women's mobility, and norms about female sexual behavior. The analysis tests the anthropological theory that a particular form of pre-industrial economic production -- subsisting on pastoralism -- favored the adoption of such customs. Pastoralism was characterized by heightened paternity uncertainty due to frequent and often extended periods of male absence from the settlement, implying larger payoffs to imposing constraints on women's sexuality. Using within-country variation across 500,000 women in 34 countries, Becker shows that women from historically more pastoral societies (i) are significantly more likely to have undergone infibulation, the most invasive form of female genital cutting, (ii) are more restricted in their mobility, and hold more tolerant views towards domestic violence as a sanctioning device for ignoring such constraints, and (iii) adhere to more restrictive norms about virginity and promiscuity. Instrumental variable estimations that make use of the ecological determinants of pastoralism support a causal interpretation of the results. The research further shows that the mechanism behind these patterns is indeed male absenteeism, rather than male dominance per se.

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