National Identity and Social Welfare

Abstract

This paper investigates the relationship between national identification and social welfare. Society is a direct democracy where representative rich and poor agents vote on their most preferred tax rate. Utilizing the economics of identity, agent utility not only depends on income but also on social identification. We show that national identification increases agent utility and social welfare when the rich implements the most preferred tax rate of the poor, who is also the median voter. Furthermore, using respondent level of happiness as a proxy for social welfare, we show that national pride has a positive impact on welfare through logit regression analysis.