Dr Kai Sebastian Gehring – Politics at the Intersection of Identity and Economics

The UK’s recent decision to exit the European Union has shone a spotlight on the role of identities in shaping people’s economic and political decisions. Dr Kai Sebastian Gehring is a senior researcher in Economics at the University of Zurich, who investigates group identities and the distribution of resources, and how they affect political stability and conflict.

Resource Allocation

The size of a species’ population is often only limited by the resources available to them. Given an unlimited supply of food, water and space, most organisms will experience exponential population growth. Humans are no exception, except that their desires extend well beyond the basics needed for survival. Economics investigates the forces that drive the production and exchange of human goods, services and wealth.

Traditionally, we ration resources through the price – goods that are rare or difficult to obtain or create are expensive, while those that are plentiful or easy to produce are cheap. This mechanism drives resource allocation for products from food to houses. While this may seem like a simple process, the exchange of goods is often a tedious and challenging task, marked by disagreements and conflict between interested parties. The potential for conflict is magnified when the scale of trade occurs between nations.

Dr Kai Sebastian Gehring, economist and researcher at the University of Zürich, works to illuminate the dynamics that impact resource allocation between groups by bridging economic theory with the psychology of group identity. His research seeks to attain a deeper understanding of the systems that can enhance resource allocation and co-operation among different nations. During an era of heightened nationalism and politics fuelled by ‘economic anxiety’, Dr Gehring’s work could provide valuable insights into the factors that shape national decisions.

The Role of Group Identities in Conflict                                               

While most people tend to view themselves as rational and practical, an analysis of even a simple shoe purchase reveals that many factors go into economic decisions well beyond the utility of a product or practicality of a trade. Modern economists use insights from psychology to understand how economic decisions are made. In recent years, ‘identity economics’ has emerged as a field that focuses how individuals make decisions in a social context. Understanding how identity factors into large scale trade decisions is paramount for improving our understanding of non-peaceful resource allocation and subsequent conflicts.

Social contexts have dramatic effects on human decision making. On a large scale, individuals from the same social group are often able to coordinate their actions to obtain a common goal, while tensions between groups can incite both economic and physical conflict. Individuals can hold multiple identities, and conflicts between them are often implicated in major conflicts. For example, when regional identities are stronger than national identities, separatist movements often result. For example, in the UK, those who see themselves as predominantly Irish, Welsh or Scottish are more likely to support a united Ireland, or Welsh or Scottish independence. Meanwhile, those with British identities are more likely to support membership of the UK.

Understanding Society to Build a Better Future

Dr Kai Sebastian Gehring, a senior researcher in Economics at the University of Zurich, endeavours to use economics to improve our understanding of society. His academic research is informed by his work experience in business and consultancy environments. His interests are centred in political economy, public economics and economic development.

Dr Gehring explains that his research objective ‘is to better understand which formal and informal institutions and political systems are most likely to make societies function well.’ In particular, he notes that he wants to understand the ‘public finances and fiscal systems that are used to govern countries or supra-national organisations, such as the European Union, with heterogeneous members.’

Funded by Swiss National Science Foundation, his recent research investigated how the distribution of resources is impacted by group identities, and how these identities affect political stability and conflict. By combining modern economic theories with concepts from political science, psychology, history and ethnology, Dr Gehring and his colleagues have been able to provide novel insights into these research questions.

Bringing the Pieces Together

A critical component of economic research is gathering meaningful and accurate data on which to base models. Dr Gehring and his colleagues frequently leverage novel methods to obtain large-scale data about the economics of an area. For example, they utilise satellite data and geo-referenced high-resolution data to create economic indicators. Patterns of night-time light, as pictured by satellites orbiting the earth, are indicators of economic activity in a region and can be obtained for any area on the globe.  

One of the most challenging obstacles for many economists is collecting historical data that provides a context for modern events. It is often cumbersome to find reliable and detailed records of past events, particularly events preceding the digital revolution. To overcome this limitation, Dr Gehring and his colleagues have worked to digitise historical sources, for example, transforming election results from old newspapers into numerical form. This allows them to aggregate data and compare sources for verification.

The key to Dr Gehring’s work is using statistical methods to tease out the underlying causes of major events. For example, his team recently investigated whether North Sea oil reserves influenced support for Scottish independence. These reserves are often hailed as a major source of wealth for an independent Scotland in political campaigns, but their potential impact had not been formally investigated. Dr Gehring’s analysis found that while support for independence is also driven by many political factors, the oil discoveries were to a large degree responsible for the rise of the Scottish National party. Using advanced statistical methods, Dr Gehring and his colleagues were able to separate the effect of oil from other entangled factors. They also document that this relationship between a region’s economic resource wealth and the success of regionalist parties holds in a much broader sample of regions across the world.

‘My hope is that through my work I can contribute my small share to provide a reliable scientific assessment that helps citizens and politicians to realise and account for the trade-offs and effects of important policy decisions.’

Identity and Economics Drive Politics  

A common assumption is that strong regional identities can threaten national stability when a person identifies more intensely with their local community than their nation as a whole. At the same time, a sufficiently strong group identity is also a prerequisite to establish risk-sharing institutions like the modern welfare state, which require a certain degree of compassion with fellow group members. Dr Gehring and his colleagues sought to understand the origins of group identities and how they might impact a country.

They focused on the division of the French regions Alsace and Lorraine after the Franco-Prussian War, and found that historical repression strengthened the shared identity of the repressed groups. When a government is working to build a new state identity, the degree to which people are willing to accept it depends on how much it appears to be in opposition with their established identities. Dr Gehring also found that a strong regional or cultural identity does not necessarily imply a weaker national identity – people are capable of holding multiple identities as long as they are not in strong conflict with one another.

Expanding on these findings, Dr Gehring and his colleagues investigated the importance of group identities in maintaining or disrupting political stability. In the previously mentioned study of the importance of oil in Scottish independence decisions, they found that citizens take into account the value of regional resources when deciding whether or not to support secession. These findings highlight the complexities of psychology in political movements. While identity plays a large role in influencing a person’s opinion about secession, economic factors play an equally critical role in how an individual weighs these decisions. Thus, multiple variables go into maintaining political stability beyond identity.

Though identity may not be the sole force driving critical political decisions, it does play a critical role in how politics and economics are handled at multiple scales. During an analysis of how EU Commissioners allocate EU funds, decisions that should in theory be driven by pragmatism and greater economic benefit, Dr Gehring and his team found that the nationality of a commissioner predicted allocations favouring their home country. The Commission is set up to be impartial, however political incentives and psychological biases often lead them to drive funds home. These results suggest that identity is a factor in motivating decisions with large scale political impacts.

Understanding What Drives Politics and Societies

Dr Gehring is driven by a deep curiosity to better understand how societies and economic systems work and to use his expertise to improve real life economic and political decisions. ‘My hope is that through my work I can contribute my small share to provide a reliable scientific assessment that helps citizens and politicians to realise and account for the trade-offs and effects of important policy decisions,’ he says.

His team’s research is highly relevant for issues facing the world today. ‘All countries or organisations like the European Union that consist of heterogeneous members need a fiscal federal system that structures the interaction between the member regions or states and the central state authority,’ he explains. The importance of this knowledge is underscored by the currently uncertain future of the European Union, which is under increasing pressure to reform after the UK’s decision to leave.

Dr Gehring is presently engaged in multiple ongoing projects aimed at further understanding the group dynamics that drive major political movements. For example, his team is currently involved in a project analysing the integration of immigrants in the US, which investigates in-group/out-group dynamics driving the acceptance or rejection of immigrants – a cornerstone of recent political movements in the US.

In another study, Dr Gehring is seeking to understand how the distribution and value of resources across different ethnic groups contributes to struggles in building stable coalition governments in many African nations. These projects aim to understand and inform discourse on these critical issues.