Identity Economics
Encyclopedia
Identity economics captures the idea that we make economic choices based on both monetary incentives and our identity: holding monetary incentives constant, we avoid actions that conflict with our concept of self. The fundamentals of identity economics was first formulated by Nobel Prize winning economist George Akerlof
and Rachel Kranton
in their article "Economics and Identity," published in Quarterly Journal of Economics.
This article provides a framework for incorporating social identities
into standard economics models, expanding the standard utility function to include both pecuniary payoffs and identity utility. The authors demonstrate the importance of identity in economics by showing how predictions of the classic principal-agent problem change when the identity of the agent is considered.
Following papers have used social identity to examine a variety of subjects within economics. Moses Shayo uses the concept of social identity to explain why countries with similar economic characteristics might choose substantially different levels of redistribution. The paper won the 2009 Michael Wallerstein
Award, given to the best article published in the area of political economy. Daniel Benjamin, James Choi, and Joshua Strickland examine the effect of social identity, focusing on ethnic identity, on a wide range of economic behavior. For a review of papers that study economics and identity, see articles by Claire Hill (2007) and John Davies (2004).
George Akerlof
George Arthur Akerlof is an American economist and Koshland Professor of Economics at the University of California, Berkeley. He won the 2001 Nobel Prize in Economics George Arthur Akerlof (born June 17, 1940) is an American economist and Koshland Professor of Economics at the University of...
and Rachel Kranton
Rachel Kranton
Rachel E. Kranton is an American economist and professor at Duke University. She is a 2010 recipient of the Blaise Pascal Chair. Kranton's research focuses on how social institutions impact economic outcomes, and has applications in a variety of fields within economics, such as economic...
in their article "Economics and Identity," published in Quarterly Journal of Economics.
This article provides a framework for incorporating social identities
Social identity
A social identity is the portion of an individual's self-concept derived from perceived membership in a relevant social group. As originally formulated by Henri Tajfel and John Turner in the 1970s and 80s, social identity theory introduced the concept of a social identity as a way in which to...
into standard economics models, expanding the standard utility function to include both pecuniary payoffs and identity utility. The authors demonstrate the importance of identity in economics by showing how predictions of the classic principal-agent problem change when the identity of the agent is considered.
Research
Akerlof and Kranton provide an overview of their work in the book "Identity Economics," published in 2010. In the book, they provide a layman's approach to Identity Economics and apply the concept to workplace organization, gender roles, and educational choice, summarizing several previous papers on the applications of Identity Economics.Following papers have used social identity to examine a variety of subjects within economics. Moses Shayo uses the concept of social identity to explain why countries with similar economic characteristics might choose substantially different levels of redistribution. The paper won the 2009 Michael Wallerstein
Michael Wallerstein
Michael Wallerstein was a noted political scientist.Wallerstein received his undergraduate education at the Stanford University, majoring in political science and graduating in 1974. He received his graduate training in political science at the University of Chicago. After receiving his Ph.D. in...
Award, given to the best article published in the area of political economy. Daniel Benjamin, James Choi, and Joshua Strickland examine the effect of social identity, focusing on ethnic identity, on a wide range of economic behavior. For a review of papers that study economics and identity, see articles by Claire Hill (2007) and John Davies (2004).