Is Inequality Tearing Us Apart? The Effect of Income Inequality on Political Polarization

This paper empirically investigates whether income inequality affects political polarization in the Netherlands. Using a new database that covers observations of Dutch municipalities, the paper quantifies the effect income inequality has on political polarization of the left-right and progressive-conservative dimensions of the political spectrum. The results indicate that a 0.01 increase in the Gini coefficient – the measure of income inequality – leads to a 0.06 increase in the left-right polarization rate. Compared with the differences in polarization in the Dutch municipalities, these findings are relatively modest in size. The results are caused by increased support for parties to the right of the political spectrum. The results become only just insignificant once clustered standard errors are used. With regard to progressive-conservative polarization, no significant relationship with income inequality is found.