Political Polarization and Income Inequality

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    Sep 25, 2015 6:33 PM GMT
    Since the early 1970s, American society has undergone two important parallel transformations, one political and one economic. Following a period with mild partisan divisions, post-1970s politics is increasingly characterized by an ideologically polarized party system. Similarly, the 1970s mark an end to several decades of increasing economic equality and the beginning of a trend towards greater inequality of wealth and income.

    We explore the relationship between voter partisanship and income from 1956 to 1996. We find that over this period of time partisanship has become more stratified by income. We argue that this trend is the consequence both of polarization of the parties on economic issues and increased economic inequality....

    ...polarization, but not inequality, seemed to (be) the primary factor behind the increased party-income stratification. This leaves us with an important puzzle: why did the parties polarize given the lack of a large direct effect of increased inequality on the composition of the parties?
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    Sep 25, 2015 6:35 PM GMT
    Political Polarization Has Never Been Worse, And It May Be Driving Inequality

    New York Fed economists think there may be a correlation between two problems currently plaguing the U.S.: extreme political polarization and income inequality.
    ...during the first half of the 20th century, the left-right political divide and income inequality decrease over time, while during the second half both increase over time.

    However, although the two measures take similar paths, you can see in the chart above that the inequality measure (in blue) lags several years behind the shift in polarization (in red).
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    Sep 25, 2015 6:41 PM GMT
    The first necessary condition for the phenomenon of wealth concentration to occur is an unequal initial distribution of wealth.