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Income Inequality and Political Polarization: Time Series Evidence Over Nine Decades

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  • John V. Duca
  • Jason L. Saving

Abstract

Rising income inequality and political polarization have led some to hypothesize that the two are causally linked. Properly interpreting such correlations is complicated by the multiple factors that drive each of these phenomena, potential feedbacks between inequality and polarization, measurement issues, and statistical challenges for modeling non-stationary variables. We find that a more precise measure of inequality (the inverted Pareto-Lorenz coefficient) is statistically related to polarization while a less precise one (top 1% income share) is not, and that there are bi-directional feedbacks between polarization and inequality. Findings support a nuanced view of the links between polarization and inequality.
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  • John V. Duca & Jason L. Saving, 2016. "Income Inequality and Political Polarization: Time Series Evidence Over Nine Decades," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(3), pages 445-466, September.
    • Handle: RePEc:bla:revinw:v:62:y:2016:i:3:p:445-466
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    Cited by:

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    3. Grechyna, Daryna, 2021. "Mandatory spending, political polarization, and macroeconomic volatility," European Journal of Political Economy, Elsevier, vol. 68(C).
    4. Alvaro Aguirre, 2024. "Macro Implications of Inequality-driven Political Polarization," Working Papers Central Bank of Chile 1011, Central Bank of Chile.
    5. Di Guilmi, Corrado & Galanis, Giorgos, 2021. "Convergence and divergence in dynamic voting with inequality," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 137-158.
    6. Giri Parameswaran & Hunter Rendleman, 2022. "Redistribution under general decision rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(1), pages 159-196, February.
    7. Arora, Swapan Deep & Singh, Guninder Pal & Chakraborty, Anirban & Maity, Moutusy, 2022. "Polarization and social media: A systematic review and research agenda," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    8. Di Guilmi, Corrado & Galanis, Giorgos & Proaño, Christian R., 2023. "A Baseline Model of Behavioral Political Cycles and Macroeconomic Fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 50-67.
    9. Christian A. Belabed, 2016. "Inequality and the New Deal," IMK Working Paper 166-2016, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    10. Florian Dorn & Clemens Fuest & Lea Immel & Florian Neumeier, 2020. "Economic Deprivation and Radical Voting: Evidence from Germany," ifo Working Paper Series 336, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    11. Daryna Grechyna, 2023. "Political polarization in the UK: measures and socioeconomic correlates," Constitutional Political Economy, Springer, vol. 34(2), pages 210-225, June.
    12. Dorn, Florian & Fuest, Clemens & Immel, Lea & Neumeier, Florian, 2018. "Inequality and Extremist Voting: Evidence from Germany," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181598, Verein für Socialpolitik / German Economic Association.
    13. Razvan Vlaicu, 2018. "Inequality, participation, and polarization," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(4), pages 597-624, April.
    14. Ali Zeytoon-Nejad, 2024. "The Big Tradeoff averted: five avenues to promote efficiency and equality simultaneously," International Economics and Economic Policy, Springer, vol. 21(4), pages 933-968, October.
    15. Proaño Acosta, Christian & Peña, Juan Carlos & Saalfeld, Thomas, 2019. "Inequality, macroeconomic performance and political polarization: An empirical analysis," BERG Working Paper Series 149, Bamberg University, Bamberg Economic Research Group.
    16. John V. Duca & Jason L. Saving, 2017. "Income Inequality, Media Fragmentation, And Increased Political Polarization," Contemporary Economic Policy, Western Economic Association International, vol. 35(2), pages 392-413, April.
    17. Proaño Acosta, Christian & Peña, Juan Carlos & Saalfeld, Thomas, 2020. "Inequality, macroeconomic performance and political polarization: A panel analysis of 20 advanced democracies," BERG Working Paper Series 157, Bamberg University, Bamberg Economic Research Group.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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