continuum from strong ethnic ties at one extreme to strong mainstream ties at the other (Simic, 1987 and Ullah, 1985). The two-dimensional model posits that the relationship with the ethnic culture and new culture must be considered and these two relationships may be independent (Phinney, 1990).
Many ethnic minorities not only develop their own ethnicity but also assimilate to the ethnicity of the majority ethnic group in the country. The recognition that there are some similarities or shared characteristics with the majority ethnic group led to some overlapping forms of social identity. This was confirmed by Gleason (1981), who found that the ethnic minority of the US not only develop ethnic identities but also assume some form of American identity as well. Judd et.al (1995) further elaborated that those members of ethnic groups who perceive themselves as different from the average American are more likely to develop a greater sense of ethnic identity because of their feelings of being a member of an out-group.
Ethnic identity formation is presented from the psychoanalytic views and development and counseling psychologists. According to Erikson (1968) identity is a result of a period of exploration and experimentation that typically takes place during adolescence and that leads to a decision or a commitment in various areas, such as occupation, religion and political orientation. In short, ethnic identity takes place over time, as people explore and make decisions about the role of ethnicity in their lives.
There are not many literatures which discuss identity dilemma from the economic reasoning. Akerlof and Krantor (2000, p.717) explained that the concept of identity expands economic analysis for various reasons, among others: identity can explain behaviour that appears detrimental, identity underlies new type of externality, identity reveals a new way that preferences can be changed and identity is fundamental to behaviour; choice of identity may be the most important economic decision people make. Sociologists, psychologists, political scientists and anthropologists have commonly agreed to adopt identity as a central concept. Nevertheless, identity, too, can be analysed from the economic perspectives, allowing a new view of many economic problems (Akerlof and Krantor 2000).
Akerlof and Krantor (2000) incorporated identity into general model of behaviour and demonstrated how identity influences economic outcomes. They concluded several examples on identity-related behaviours that are
i. ii. iii
people have identity-based payoffs derived from their own actions; people have identify-based payoffs derived from others‟ actions; . third parties can generate persistent changes in these payoffs; and
iv. some people may choose their identity, but choice may be proscribed for others.
In general, ethnic identity could be measured as comprising the components of self- identification as a group member, a sense of belonging to the group, attitudes about a person‟s group membership, and ethnic involvement (social participation, cultural practices and attitudes) (Phinney, 1990). Those individuals who are members of an ethnic group perceive their status as separate from the larger, dominant culture, and as a result, spend time exploring and developing their ethnic identities (Phinney, 1990). Phinney and Devich-Navarro (1997) found that the ethnic minority individuals develop multiple identities, one representing their own ethnic cultures and the other