Title: Identity Politics and Economic Policy
How does identity politics impact political conflict over economic policy? I present a formal model of political competition in culturally divided societies to explicate the link between identity politics and politics over economic policymaking. I show that both brands of politics are symptomatic of the same strategic choice faced by politicians. My key insight is that incentives to engage in identity politics dampen motivations to win support using economic policy. By triggering identity in the electoral arena, politicians can boost their popularity among voters who value identity. But the ‘identity card’ polarizes political preferences among groups mobilized on identity, which in turn makes voters in these communities relatively less responsive to marginal changes in economic policy. Politicians thus face electoral motivations to fashion economic policies toward members of other identity groups. My focus on identity mobilization generates insights that upturn many expectations about who gets what from the state in divided democracies. Contrary to conventional wisdom, I show that identity politics incentivize politicians to cater to the economic interests of minorities, and that industries with larger shares of majority group workers receive fewer preferential policies because politicians are more likely to court voters in these groups by using identity appeals. I test my theoretical predictions by using original data on industry-level trade policies and indicators of ethnicity in India.