National Identity, Revolt and Taxation

Abstract

This paper investigates the impact of national pride on the likelihood of revolt. We propose a sequential game with a representative rich agent who decides and implements the tax rate, and a representative poor agent who either launches a revolt to oust the rich or accepts income redistribution. Using the economics of identity, the poor’s utility not only depends on agent income but on the utility from national identification. We demonstrate that the likelihood of revolt by the poor and the tax rate that the rich needs to implement to avert a revolt decreases with national pride. We substantiate these results using logit regression analysis applied to data in the World Value Survey.