Impact of Political Polarization on Economic Conditions

William Ginn () and Jamel Saadaoui
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William Ginn: Labcorp and Coburg University of Applied Sciences

No 2025.3, Working Papers from International Network for Economic Research - INFER

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.

Keywords: Political polarization; panel local projections; economic development (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
Pages: 11 pages
Date: 2025
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