This research is examines how state-level income inequality impacts political polarization within state legislatures. It's from one of our graduate students, John Voorheis (who will be on the job market at the AEA meetings this year), along with Nolan McCarty at Princeton and Boris Shor at Georgetown (who have very good state level legislator ideology data).
They have some preliminary results, which were presented this at last weekend's APSA meetings (there is a preliminary working paper on SSRN). Here's a thumbnail sketch of the results:
- They use a simulated instrument for state level inequality to address potential endogeneity between state politics and state income distributions. That allows them to estimate the causal effect of inequality on polarization (a first for this literature).
- They find robust evidence that increases in state inequality cause increased political polarization (i.e. the ideological distance between Democratic and Republican parties).
- Inequality affects the mean position of both Democratic and Republican parties, but the effect is larger and more precisely estimated for Democrats.
- Income Inequality also causes a rightward shift in the average ideology of state legislatures.
- They conclude that inequality's effect on polarization primarily occurs through moving the moderate wing of the Democratic party to the left; this occurs through replacing moderate Democrats with Republicans, which results in a more liberal Democratic party but a more conservative legislature overall.
John's work was supported by a young scholar grant from the Washington Center for Equitable Growth.