Forging Apartheid: Market Access and the Rise of National Identity in Colonial South Africa

Do markets make or break nations? I study the impacts of increases in market integration on white settlers' national identity choice in colonial South Africa. For causal identification, I exploit time and geographical variation in increases in local market access—a reduced-form expression derived from general equilibrium trade theory. I estimate the impact of market access on parent's choice of children's first names, the language of newspaper publications, grassroots organizations meetings, and members of parliament's last names. Higher increases in market access lead white settlers to choose either British or Afrikaner national identity, activating a cultural boundary between them. This national break is likely driven by market access' differential impacts on racial mobility. Higher racial mobility decreases white settlers' social utility, increasing the marginal value of institutionalizing non-white populations' repression, or apartheid, prompting identification with the Afrikaner—who support this policy. The absence of racial mobility does not decrease white settlers' social utility, increasing the marginal cost of not identifying with the dominant British—who prohibit institutionalized racial segregation, or apartheid. I find no evidence supporting that other normative disagreements, such as religious beliefs, drive this national divide.