Identity Politics, Partisan Sentiment and Household Spending

Speaker: Ronit Mukherji

Affiliation: Ashoka University

Location: Level 6 Boardroom (629), Colin Clark Building (#39), St Lucia Campus

Zoom: https://uqz.zoom.us/j/82603079317

Abstract: We examine how political shifts affect household economic sentiment and spending in identity-polarized settings. Using panel data on over 178,000 Indian households, we find that sentiment about personal finances—and, to a lesser extent, the national economy—predicts expenditure, even after accounting for income changes. Exploiting close state elections, we find that Muslims become markedly more pessimistic about the national economy after victories by the Hindu-nationalist party, with a muted divergence in personal sentiment and consumption. A Bayesian learning framework explains the insulation of consumption from politically induced sentiment shocks through the limited transmission of macro-beliefs to individual behavior in high-volatility environments.