On Social Cohesion and Social Disintegration

In this paper, we argue that the recent erosion of the societal consensus in many democratic countries reflects a mix of economic and non-economic forces, which potentially reinforce each other. We present a simple model of a society that consists of different income groups, and in which the government uses redistributive taxation to maximize its political support. Under social cohesion, all citizens identify with the society at large, setting aside their own non-economic priorities and ambitions in the interest of the common good. We analyze the consequences of an exogenous identification shock, which induces high-income earners to no longer identify with the society at large. This shock forces the government to reconsider its tax policy and other citizens to reconsider their identification choices. We establish conditions that must be satisfied to prevent such a society from dropping into a state of social disintegration – i.e. a situation in which neither high-income earners nor low-income earners identify with the society – and highlight the parameters that determine the likelihood of such an outcome. Tentative empirical evidence supports the model's main hypotheses.