The Rise of Identity Politics

Abstract: We develop a dynamic model of multi-dimensional politics to ex- plore how political cleavages, policies, and social identities interact over time. The model yields insights into the profound political changes we have witnessed around the world, as economic shocks and trend- wise breakdowns of traditional social hierarchies have reinvigorated nationalist sentiments. We show how such sentiments can shape im- migration policy, and how this may shape the outlook for the next gen- eration. Shifting outlooks are reflected in political preferences implied by social-identity choices, which are modeled as a process of cultural evolution. Expected policy thus feeds back to political preferences, rooted in endogenous social identities. Once we allow for endogenous political organization, formation of social movements or new politi- cal parties, the model can also encompass mechanisms of hysteresis, such that temporary shifts in nationalism can have permanent effects.