Crowding-out the in-group bias: a nationalist policy paradox?

Using a dictator game experiment, we investigate if a policy of introducing material incentives to favour one’s own group members will be effective in raising the in-group bias in behaviour. It is not: the introduction of the material incentives in our experiment crowds-out the in-group bias in our subjects’ social preferences. Specifically, we find evidence that is consistent with the social identification with own group members weakening through the introduction of material incentives towards the in-group bias. This result potentially creates a nationalist policy paradox whereby policies like tariffs and discriminatory employment regulations designed to encourage materially the employment of home rather than foreign workers will, on the evidence of this experiment, weaken individuals’ preferences for favouring home over foreign workers. Key Words: experiment, dictator game, social identification, in-group bias, incentives, crowding-out