From the abstract:
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 identified 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 identification strategy allows us to obtain the first credible causal estimates of the effect of inequality on polarization within states. We find that income inequality has a large, positive and statistically significant effect on political polarization. Economic inequality appears to cause state Democratic parties to become more liberal. Inequality, however, moves state legislatures to the right overall. Such findings suggest that the effect of income inequality impacts polarization by replacing moderate Democratic legislators with Republicans.
Opinion: Three reasons political polarization is here to stay
Source: Jane Mansbridge, Washington Post, March 11, 2016
….Three major structural changes — gradual party realignment, closer elections and inequality — largely explain the huge decline in the numbers of party members willing to vote for legislation that the other party has sponsored, and in particular the number of Republicans willing to vote for measures the Democratic Party has sponsored. None of these causes is likely to change….
…..Nolan McCarty and his colleagues at Princeton are beginning to tease out the mechanisms. In state politics, they find that states with increasing income inequality experience two polarizing effects. First, state Republican parties shift to the right overall. Second, state Democratic parties shift to the left because their moderates lose. Rich Republican donors could well be responsible for both outcomes if, as seems likely, they fund more extreme candidates in Republican districts and target the Democrats they have the best chance to dislodge, namely those in politically moderate districts.
The big picture is that the extraordinary growth in incomes at the top of the income distribution makes possible the discretionary money that can then be poured into politics, and those who contribute to politics are, on average, a good deal more extreme in their views than the average voter….