We study ingroup bias-the preferential treatment of members of one's group-in naturally occurring data, where economically significant allocation decisions are made under a strong non-discriminatory norm. Data come from Israeli small claims courts during 2000-2004, where the assignment of a case to an Arab or Jewish judge is effectively random. We find robust evidence for judicial ingroup bias. Furthermore, this bias is strongly associated with terrorism intensity in the vicinity of the court in the year preceding the ruling. The results are consistent with theory and lab evidence according to which salience of group membership enhances social identification.
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∗Wethanktheeditor, LarryKatz, threeanonymous referees, Maya Bar-Hillel, Dan Benjamin, Effi Benmelech, Yoav Dotan, Haggay Etkes, David Genesove, Eric Gould, Christine Jolls, Dean Karlan, Esteban Klor, Saul Lach, Victor Lavy, Barak Medina, Omer Moav, Daniele Paserman, Michael Rabin, Andrei Shleifer, Raanan Sulitzeanu-Kenan, Noam Zussman, and participants of seminars at BU, Cornell, Duke, Hebrew U, NYU, Princeton, Yale, the Jerusalem Conference on Behavioral Economics (2010), and the NBER Summer Institute (2010) for valuable comments. Excellent research assistance was provided by Eli Bing, Yifat Fer-der, Moran Kaganovski, Dani Kariv, Shelly Mana, Ofer Menachem, Tal Orbach, Adi Ra’anan, Reut Rosenthal, Rotem Shacham, Ya’arit Shani, and especially It-tai Shacham. The Maurice Falk Institute for Economic Research in Israel provided generous financial support. Moses Shayo thanks the Leitner Program in Political Economy at Yale University for its hospitality during his sabbatical visit in 2010–11.