ECONOMIC CONSEQUENCES OF SOCIAL IDENTITY † Discrimination, Social Identity, and Durable Inequalities By KARLA HOFF AND PRIYANKA PANDEY* What are the mechanisms by which societal discrimination affects individual achievement, and why do the effects of past discrimination endure once legal barriers are removed? We report the findings of two experiments in village India that suggest that the mechanisms of dis- crimination operate, in part, within the individ- uals who are members of the groups who have been discriminated against. We demonstrate that publicly revealing an individual’s member- ship in such a group alters his behavior in ways that make the effects of past discrimination per- sist over time. A growing literature in social psychology on stereotype threat finds that stereotyped-based expectations affect individual performance in the domain of the stereotype. 1 A study by Jeff Stone et al. (1999) is illustrative. When college students were asked to perform a task described as diagnostic of “natural athletic ability,” blacks—stereotyped as better athletes, but worse students than whites—performed better than whites. When the same test was presented as diagnostic of “sports intelligence,” the per- formance of blacks declined, that of whites im- proved, and the racial gap was reversed. Evidence suggests that a mediating factor in stereotype threat is a change in self confidence (Mara Cadinu et al., 2005) In our studies, we investigated whether the public revelation of social identity (caste) af- fects cognitive task performance and responses to economic opportunities by young boys in village India. Subjects were sixth and seventh graders drawn from the two ends of the caste hierarchy. We asked subjects to learn and then perform a task under incentives, and we manip- ulated whether their peers in the experimental session knew their caste. Caste is well-suited to this manipulation because, unlike race, gender, and ethnicity, there are no unambiguous out- ward markers of caste among young boys. Six subjects, generally from six different villages, participated in each experimental session. In the control condition, the subjects were anonymous within the six-person group. In the experimental conditions, the experimenter publicly revealed subjects’ names and caste. In the task—solving mazes—in which performance was studied here, 2 the low-caste subjects in the anonymous condition did not perform significantly differ- ently from high-caste subjects; but when caste identity was publicly revealed in a mixed caste group, a significant caste gap emerged. The caste gap was due to a 20 percent decline in the average number of mazes solved by the low caste. The study shows that publicly revealing the social identity of an individual can change his behavior even when that information is ir- relevant to payoffs. Our results are a generalization of the litera- ture on stereotype threat. Like that literature, we find that individuals’ performance is more in accordance with the stereotype of the group when group membership is made salient in some way. Unlike that literature, salience in our experiments depends on the public revelation of social identity and more importantly, we do not argue that the domain of the tasks undertaken by † Discussants: Rachel Croson, University of Pennsylva- nia; Iris Bohnet, Harvard University; Stefano DellaVigna, University of California-Berkeley. * Hoff: World Bank, 1818 H St., N.W., Washington, DC 20433 (e-mail: khoff@worldbank.org); Pandey: World Bank, 1818 H St., N.W., Washington, DC 20433 (e-mail: ppandey@worldbank.org). Thanks to Rachel Croson, Erika Hoff, and Kenneth Sokoloff. And to Mayuresh Kshetra- made, Anaka Narayanan, Ram Pratap, and Sonal Vats for research assistance. We gratefully acknowledge support from the World Bank and the MacArthur Foundation. Data are available at http://www.povertyactionlab.com/data. 1 A survey is in Claude M. Steele et al. (2002). 2 Uri Gneezy et al. (2003) showed that mazes are an appropriate task to use to study responses to changes in incentive schemes. 206