Income Inequality and Political Polarization

Waldemar Marz

No 11062, CESifo Working Paper Series from CESifo

Abstract: Value issues such as climate policy, immigration, or identity politics are among the most polarizing policy issues in the U.S. and other high-income countries. That polarization has been rising over the last decades. I investigate a novel channel of income inequality and political campaign contributions on party polarization on the value dimension that is independent of changing voter preferences. In a model of two-dimensional party competition, I show analytically how rising income inequality brings parties’ economic policies closer together if campaign contributions are an important factor for electoral success. This lets sensitive voter groups switch their party allegiance and pushes parties to try to distinguish themselves by increasingly focusing on value policy dimension. Income growth, a rising salience of the value issue, and low voter turnout exacerbate this polarization channel. The analysis suggests possible ways forward: 1) a stricter regulation of campaign finances and 2) framing climate primarily as an economic policy issue that puts distributional implications (and remedies) front and center.

Keywords: political economy; climate policy; polarization; voting; values (search for similar items in EconPapers)
JEL-codes: D63 H23 P16 Q52 Q54 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-cdm, nep-env and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11062

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