Economic, social and political fragmentation: Linking knowledge-biased growth, identity, populism and protectionism

• Published in: European Journal of Political Economy Vol. 67; p. 101965
• Main Authors: Snower, Dennis J., Bosworth, Steven J.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01-03-2021; Elsevier Science Ltd
• Subjects: Bias; Communitarianism; Constituents; Economic inequality; Economic policy; Endogenous; Globalisation; Identity; Identity formation; Immigration; Immigration policy; Income inequality; Individualism; Inequality; Nationalism; Political economy; Populism; Protectionism; Segmentation; Social fragmentation; Social identity; Standard of living; Communitarianism; Social fragmentation; Identity; Globalisation; Individualism; Inequality
• ISSN: 0176-2680; 1873-5703
• DOI: 10.1016/j.ejpoleco.2020.101965

This paper examines how economic fragmentation (widening inequality of skills, income and education) gives rise to social fragmentation (via incompatible social identities), generating political fragmentation (via incompatible economic policies). We consider three value-driven identities: individualism, focused on status concerns, communitarianism, focused on social affiliations, and multi-affiliatedness, encompassing both objectives. Under endogenous identity formation high-skill people are drawn to individualism, the lower-skilled to communitarianism, and those of intermediate skill to multi-affiliatedness. Skill- and education-biased growth leads to increasing social polarisation, expanding the individualistic and communitarian groups at the expense of multi-affiliates. This expands the political constituency for closed policies (such as protectionism, immigration controls and nationalism), even when these policies reduce everyone's living standards. Our analysis thereby helps explain the economic and social underpinnings of populism.
•People of low, intermediate and high abilities adopt different identities.•Communitarian, multi-affiliated and individualistic identities depend on abilities.•Ability-biased growth leads to social polarisation.•Thus there is a narrowing of the moral foundations driving economic policy.•The size of the coalition voting for protectionism rises with ability-biased growth.