Income comparisons and attitudes towards foreigners - Evidence from a natural experiment

We exploit a natural experiment related to the German re-unification to address whether disutility from income comparisons affects attitudes towards foreigners. Our empirical approach rests upon East German individuals with West German relatives and friends. We use the exogenous variation of wealth of West Germans shortly after the fall of the Berlin Wall as an instrument to identify the effect of disutility from income comparisons on East Germans’ attitudes. We find robust evidence that East Germans express more negative attitudes towards foreigners, particularly from low-wage countries, if they worry about their economic status compared to better-off West Germans.