he main insight of the research done in this project is that specific economic shocks can change the dimensions of political conflict. They can explain why the traditional economic and redistributive conflict between left and right has been waning, and in its place a new conflict between nationalist and socially conservative versus cosmopolitan and socially progressive positions has emerged.
We investigate two mechanism. The first one exploits insights from social identity theory. Politics is about opposing social groups: us versus them. But who is ‘us’ and who is ‘them’? In the past, this had to do with class-based distinctions and the divide between left and right. Globalization and technology have enhanced the relevance of another distinction, based on cultural attitudes and education, because winners and losers in the new economic environment are largely partitioned by the educational and cultural divide. This redefinition of politically relevant social groups is important, because social identity shape beliefs and value judgments.
Switching social identities and the resulting changes in beliefs and policy preferences can explain why economic distress is associated with waning economic support for redistribution and an increase in social conservatism. Economic shocks hitting socially conservative and less educated social strata have enhanced similarity within this group. The distinctive traits of losers from globalization and technology are a low education and social conservatism, not being member of a trade union or being very poor. The policies that are demanded reflect these distinctive group traits, and they entail an exaggerated perception of group conflict along the dimension defining the new social identities.
With this grant I have outlined this mechanism in greater detailed, generated and tested specific predictions supporting these ideas, and studied how political parties and leaders can exploit shifting social identities in the course of electoral competition and in their propaganda.
The second mechanism we study, also drawn from psychology, focuses on disappointed expectations. As suggested by prospect theory, economically disappointed voters welcome political risk, because it gives them a chance to make up what they have lost. This makes populist politicians attractive to disappointed voters, because being untested, radical and anti-establishment, they provide a risky and new alternative to mainstream politicians.
Both mechanisms can explain why economic shocks have important spillover effects. In the first case, shocks induced by technology and globalization increase the relevance of conflict dimensions associated with the cultural /education divide; in the second case, large economic downturns increase the relevance of conflict associated with mistrust in governing élites.
I have also studied how social media can amplify some of these transformations. Exploiting the gradual roll out of 3G and 4G technologies across European localities, we show that exposure to mobile internet has made voters more communitarian (eg. more nationalistic and intolerant of minorities), with stronger effects in economically disadvantaged areas. This too can explain the rise of communitarian and right-wing populist and nationalist parties in Europe.
To shed further light on the effect of social media on belief formation, we have also studied how individuals behave in a popular US web platform, Reddit, when faced with unpleasant political news (eg. a scandal involving their favorite political candidate, or a new poll unfavorable to their supported party or candidate). The evidence indicates that individuals are prone to “Ostrich” like behavior: they do not engage with unpleasant political news and tend to resist it, while they behave in the opposite way if the news is pleasant. These findings shed light on why partisan supporters often seem exceptionally stubborn, and do not change opinions when presented with seemingly undisputable facts.
These results have been widely presented in conferences and seminars. Their dissemination has been facilitated by the fact that I was President of the Econometric Society during 2022. I presented these results in conferences throughout the world. To confirm its significance, despite its being very recent, the work on social identity supported by this project was also mentioned by the jury as one of the motivations for my receiving the prestigious 2022 BBVA Frontiers of Knowledge Award in economics, finance and management."
