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Impact of Political Polarization on Economic Conditions

Author

Listed:
  • William Ginn

    (Labcorp and Coburg University of Applied Sciences)

  • Jamel Saadaoui

    (University Paris 8)

Abstract

This study investigates the impact of political polarization on output growth, capital formation, and foreign direct investment (FDI) across 139 economies via a panel Local Projections (LP) model. We examine whether the effects of political polarization vary by income group (advanced [AEs], emerging markets [EMs]) and by political regimes (democracy, autocracy). Our findings reveal that political polarization negatively affects output growth and capital formation, with adverse effect on FDI in EMs and autocracies, highlighting “hidden” economic costs of polarization.

Suggested Citation

  • William Ginn & Jamel Saadaoui, 2025. "Impact of Political Polarization on Economic Conditions," Working Papers 2025.3, International Network for Economic Research - INFER.
    • Handle: RePEc:inf:wpaper:2025.3
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    File URL: https://infer-research.eu/wp-content/uploads/2025/03/WP2025.03.pdf
    File Function: First version, 2025
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    More about this item

    Keywords

    Political polarization; panel local projections; economic development;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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