Essays in political economy : information, identity, and institutions

This dissertation consists of four essays on politics and economics. They employ a rich set of methodologies from applied microeconomics and analytical political science in attempts to shed lights on how information, identity, and institutions interact and shape behaviors, politics, and policies. Chapter 1, "The Limits and Side Effects of Persuasion: Political Endorsement and Trust in Scientific Expertise During COVID-19" examines how the American public reacts to politically relevant information from reputable independent sources and how the reaction affects their subsequent information acquisition. I leverage the scientific journal Nature's high-profile political endorsement during the COVID-19 pandemic and conduct a large-sample pre-registered online experiment, in which respondents are randomly assigned to read a short message summarizing the endorsement. The results show that, instead of changing their views about the candidate being endorsement, individuals adjust their assessments of the information source, namely Nature, and their willingness to acquire information from the source. This behavioral response depends crucially on the individuals' political predisposition. In particular, those whose political views are contradicted by the endorsement react by reporting lower levels of trust toward the source and turn down subsequent information provided by it. On the other hand, individuals whose political views are confirmed by the endorsement have the opposite response. I show that this dynamic has adverse and polarizing effects on public health information acquisition during COVID-19 and public confidence in the scientific community. The results from Chapter 1 demonstrate that differences in prior political views can lead to selective exposure to information sources. This tendency has the potential to magnify existing polarization of beliefs, as individuals disproportionately receive information from like-minded sources. In an age of political divisions, it is imperative to understand how policy-making under democratic institutions responds to selective information exposure in equilibrium. Chapter 2 sheds lights on this question from a theoretical perspective. While Chapter 1 investigates the origin of selective exposure to information, Chapter 2 "One Side, Now: Selective Exposure and Electoral Competition" examines the consequence of such selective exposure in an electoral setting. In this chapter, Avidit Acharya, Peter Buisseret, Adam Meirowitz, and I construct and analyze a formal model of election with imperfectly informed voters. Crucially, and consistent with the implications of Chapter 1, voters on both sides only acquire information from politically likely-minded sources, which systematically under-report information that is at odds with its audience's predisposition. We show that, relative to a benchmark where voters are fully informed by balanced sources, selective exposure reduces policy platform polarization. This counter-intuitive result does not depend qualitatively on the assumption that sophisticated voters correctly process slanted information. Relaxing Bayesian rationality reveals that the resulting "behavioral" equilibrium still exhibits lower levels of platform polarization relative to the full-exposure benchmark, even though voters are gullible and their beliefs are systematically manipulated by the biased information environment. This chapter shows the critical role of institutions, in this case elections, in conditioning the effects of information and behaviors on political and policy outcomes in non-obvious ways. Chapter 3 "Rage Against the Merchant: Automation and the Political Economy of Trade Protection" studies the interaction between institutions and information empirically in a concrete policy setting of enormous economic significance. In particular, it examines the making of protectionist trade policies in the U.S. Congress and links it to the labor market impacts of automation. Using an instrumental variable strategy, I find quantitative evidence suggesting trade and globalization are "scapegoated" for economic dislocations caused by labor-displacing technologies. Specifically, the chapter documents that House of Representative members representing labor markets more exposed to industrial robots vote in a more protectionist way on trade bills. Further analyses show this relationship is likely mediated by House members being pressured to become more protectionist, instead of the selection of protectionist candidates into office. In addition, the effect is stronger in districts poorly served by the local media market, suggesting mis-attribution and lacks of information are a key mechanism. To conclude Chapter 3, I discuss the connections and differences between my findings and that of existing studies on the electoral consequences of automation, which largely focus on European legislative elections and U.S. presidential elections. I argue that the institution of the U.S. Congress explains the differences and that my results call for a more nuanced interpretation of the existing findings centered on policies. The fourth and final chapter "The Opioid of the Masses? On the Political Economy of Nationalism and Redistribution in Autocracies" explores the role of social identity and how identity interacts with its institutional environment. Unlike the previous chapters, Chapter 4 focuses on autocracies. I analyze a simple model of endogenous identity formation in a stylized autocratic political economy, where distributive conflicts are resolved by the threat of revolution. I show that nationalism, the self-identification of citizens with the nation, reduces citizens' demand for redistribution and their willingness to challenge the autocratic elite. A structural econometric model is developed to demonstrate the empirical applications of the theory. I explore the equilibrium implications of this behavioral model by embedding it in a model of autocratic policy-making, which shows that the legitimizing effect of nationalism accelerates economic growth but increases income inequality. This unambiguous prediction is in sharp contrast with previous theoretical works on national identity and redistribution in democracies, which predict multiple equilibria with varying levels of output and inequality

Keywords: Business.
Advisor: Acharya Avidit
Malhotra Neil Ankur
Jha Saumitra
Shotts Kenneth W.