Identity and underrepresentation: Interactions between race and gender

Economic outcomes vary significantly across socio-demographic groups. In a model of multidimensional identity, we show how differences in economic participation can give rise to identity-specific norms which ‘normalize’ and lock in the historical underrepresentation of various groups. Whereas standard approaches treat identity dimensions as independent, our analysis reveals deep connections between inequality and underrepresentation based on race, gender, and other characteristics. ‘Sterilized interventions’ along a single identity dimension are generally impossible. Interventions that aim to reduce underrepresentation along one identity dimension can increase underrepresentation along another. We show how underrepresentation can be eliminated along every dimension, through a system of (a) self-financing subsidies or (b) role models, where interventions are ‘intersectional’, i.e., connected across identity dimensions. When the strength of group identification is made endogenous, underrepresentation disappears in the long run on its own. Depending on the environment, affirmative action can either speed up or slow down this process.