Unequal Incomes, Ideology and Gridlock: How Rising Inequality Increases Political Polarization

Income inequality and political polarization have both increased dramatically in the United States over the last several decades. A small but growing literature has suggested that these two phenomena may be related and mutually reinforcing: income inequality leads to political polarization, and the gridlock induced by polarization reduces the ability of politicians to alleviate rising inequality. Scholars, however, have not credibly identied the causal relationships. Using newly available data on polarization in state legislatures and state-level income inequality, we extend previous analyses to the US state level. Employing a relatively underutilized instrumental variables identication strategy allows us to obtain the rst credible causal estimates of the eect of inequality on polarization within states. We nd that income inequality has a large, positive and statistically signicant