Discussion Paper

The Capitol Since the Nineteenth Century: Political Polarization and Income Inequality in the United States


Abstract: Even the most casual observer of American politics knows that today?s Republican and Democratic parties seem to disagree with one another on just about every issue under the sun. Some assume that this divide is merely an inevitable feature of a two-party system, while others reminisce about a golden era of bipartisan cooperation and hold out hope that a spirit of compromise might one day return to Washington. In this post, we present evidence that political polarization?or the trend toward more ideologically distinct and internally homogeneous parties?is not a recent development in the United States, although it has reached unprecedented levels in the last several years. We also show that polarization is strongly correlated with the extent of income inequality, but only weakly associated with the rate of economic growth. We offer several tentative explanations for these relationships, and discuss whether all forms of polarization are created equal.

Keywords: Polarization; Inequality; Dyfunctionality; DW Nominate;

JEL Classification: H00;E2;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2014-06-23

Number: 20140623a