Complex institutions, social identities, and belief formation

Do social identities impede citizens’ ability to form accurate beliefs about politics when policy outcomes are generated by complex institutions? We study this question theoretically and experimentally. In our formal model, citizens do not know the competence of the officeholder and they do not know whether or not the opposition enjoys veto powers, but they do observe policy outcomes. After characterizing Bayesian beliefs, we hypothesize that identity concerns cause upward (downward) biased beliefs among citizens who are aligned with the office-holder (opposition) for the competence of the officeholder. In our experiment, we find that identities do not affect beliefs about competence. However, identities affect beliefs about opposition veto power: for subjects aligned with the incumbent, identities have a negative effect when there is good news about policy; for subjects aligned with the opposition, identity concerns have a negative effect when there is bad news about policy.