Left Behind: Partisan Identity and Wealth Inequality
38 Pages Posted: 4 Jun 2019
Date Written: May 8, 2019
Using longitudinal household data, I document that Democrats are less likely than Republicans to invest in the stock market under Democratic presidencies, precisely when stock market return is substantially higher. This pattern contains even for college-educated and financially sophisticated individuals, and is best explained by their partisan identity. Moreover, the gap in stock market participation between Democrats and Republicans accounts for about half of their discrepancy in wealth accumulation over presidential cycles. A profound implication of these findings is that rising political polarization in the U.S. may be fueling wealth inequality.
Keywords: partisan identity, wealth inequality, presidential cycle, political polarization, stock market participation
JEL Classification: D31, G02, G11
Suggested Citation: Suggested Citation