Identity and Mobility: Theory and Evidence from the American Midwest

This paper investigates the role played by a cultural trait – identity – in determining occupational choice and mobility. The analysis links competition between migrant networks in the Midwest when it was first developing and the community identity that emerged endogenously to support these networks in particular local areas (counties) to institutional participation and occupational choice today. Individuals born in counties with greater ethnic fractionalization in 1860, where our dynamic theory predicts a larger fraction of the population will be instilled with identity are (i) significantly more likely to participate in particular institutions that are associated with the instilling of this cultural trait, and (ii) significantly less likely to select into mobile skilled occupations 150 years later. The effect of 1860 fractionalization on participation in identity-instilling institutions actually grows stronger over time, emphasizing the idea that small differences in initial conditions with respect to the cultural trait under consideration can have large long-term effects on institutions and economic choices.