Symbolic Policies Cause Economic Harm: Cognitive and Behavioural Responses to Identity-based Exclusion

Abstract

Ethnonationalist governments frequently adopt policies that challenge the status of ethnic minorities as equal members of the nation. We propose that such policies – even when purely symbolic – have tangible consequences for the groups they target through a previously understudied channel. Exposure to exclusionary policies may reduce the cognitive bandwidth of individuals belonging to marginalized groups, leading to worse economic decisions. We test this hypothesis in India where the party in power promotes a nationalist ideology that favours Hindus over Muslims. We employ close to 2000 gig workers to complete basic data entry and information processing tasks. We randomize whether workers encounter content that mentions either symbolic or material exclusionary policies, and we give workers the opportunity to select one of two payment contracts. We show that exposure to exclusionary policies increases the probability that treated Muslims choose the “wrong” contract, leading to lower earnings. Even symbolic policies can cause economic harm.