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Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization

52 Pages Posted: 23 Aug 2015  

John Voorheis

University of Oregon - Department of Economics

Nolan McCarty

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Political Science

Boris Shor

University of Houston - Department of Political Science

Date Written: August 21, 2015

Abstract

Income inequality and political polarization have both increased dramatically in the United States over the last several decades. A small but growing literature has suggested that these two phenomena may be related and mutually reinforcing: income inequality leads to political polarization, and the gridlock induced by polarization reduces the ability of politicians to alleviate rising inequality. Scholars, however, have not credibly identified the causal relationships. Using newly available data on polarization in state legislatures and state-level income inequality, we extend previous analyses to the US state level. Employing a relatively underutilized instrumental variables identification strategy allows us to obtain the first credible causal estimates of the effect of inequality on polarization within states. We find that income inequality has a large, positive and statistically significant effect on political polarization. Economic inequality appears to cause state Democratic parties to become more liberal. Inequality, however, moves state legislatures to the right overall. Such findings suggest that the effect of income inequality impacts polarization by replacing moderate Democratic legislators with Republicans.

Keywords: polarization, income inequality, state legislatures, ideology

JEL Classification: D63, D31, D72

Suggested Citation

Voorheis, John and McCarty, Nolan and Shor, Boris, Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization (August 21, 2015). Available at SSRN: https://ssrn.com/abstract=2649215 or http://dx.doi.org/10.2139/ssrn.2649215

John Voorheis (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

HOME PAGE: http://pages.uoregon.edu/jlv

Nolan McCarty

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Princeton University - Department of Political Science ( email )

Corwin Hall
Princeton, NJ 08544-1013
United States
(609) 258-1862 (Phone)
(609) 258-2809 (Fax)

Boris Shor

University of Houston - Department of Political Science ( email )

Houston, TX 77204-3011
United States

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