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Inequality as a source of political polarization: A comparative analysis of twelve oecd countries

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Abstract

This chapter focuses on the effects of income inequality on party politics in industrialized democracies. Having devoted a great deal of attention to the political determinants of income distribution in the 1990s, students of comparative political economy have recently begun to address how the distribution of income affects politics and, in particular, government policy (see, for example, Bradley et al. 2003; Kenworthy and Pontusson 2005; Mahler 2006; Moene and Wallerstein 2001, 2003). To date, virtually all the comparative literature on this topic takes the Meltzer-Richard model as its point of departure and investigates the association between inequality and various measures of redistributive government spending (Meltzer and Richard 1981). A common conclusion in the literature is that the core proposition of the Meltzer-Richard model-that inequality generates more redistributive government-provides precious little leverage, if any at all, on the problem of explaining why some countries have more redistributive welfare states than others. Theoretically, we seek to break new ground by elaborating a partisan model of the political effects of inequality that abandons the Meltzer- Richard premise that the preferences of the median voter determine party policy. In our analytical framework, parties of the left and the right draw their core constituencies from different segments of the income distribution, and inequality affects the policy preferences of these constituencies differently. In its simplest version, our model predicts that core left voters want more redistribution and core right voters want less redistribution as inequality rises. This main argument, however, is greatly affected by two significant factors: The kind of inequality in question and the degree of mobilization among low-income workers. Our empirical analysis seeks to explain party positions in electoral campaigns, as measured by the Comparative Manifesto Project (CMP), rather than policy outputs. To some significant extent, using election manifestos to measure party positions allows us to bracket the economic and bureaucratic constraints that parties inevitably face in government and thus to focus more directly on party responses to (changes in) voter preferences. In contrast to Meltzer and Richard, we do not assume that voting alone determines government policy. The motivation behind this chapter partly derives from Nolan McCarty, Keith Poole, and Howard Rosenthal's (2006) analysis of the recent polarization of American politics. These authors document that partisanship in congressional roll-call voting declined in the 1950s, held steady through most of the 1960s and 1970s, and then increased sharply from the late 1970s onwards. They demonstrate that this pattern parallels trends in income distribution in a very striking manner (and also that income has become a better predictor of individual party choice as inequality has increased over the last three decades). Polarization can take several different forms. If left parties move to the left and right parties move to the right, we observe what we here refer to as "symmetric polarization." If right parties move to the right while left parties stay put, or if both parties move to the right but right parties move farther to the right than left parties, we observe "right-skewed polarization." Conversely, "left-skewed polarization" represents a third potential scenario. To distinguish among these alternative scenarios we estimate the effects of inequality on left-right positions adopted by the main parties of the left and the right in each of the twelve countries included in our analysis.1 Theoretically and empirically, we distinguish between the partisan effects of wage inequality and those of other forms of income inequality. The core constituencies of left and right parties are distinguished from each other not only by where they fall in the overall income distribution but also by the sources of their income. We argue that left parties are particularly responsive to wage inequality because their core constituencies consist of voters who derive the lion's share of their income from dependent employment. As wages account for a considerably smaller share of total income among the core constituencies of right parties, these parties should be more responsive to other manifestations of inequality. We argue further that political mobilization of low-income groups, measured by aggregate voter turnout and union density, conditions partisan responses to inequality. To anticipate, the results reported here indicate that wage inequality is associated with more leftist left parties at medium and high levels of lowincome mobilization, while there is no significant association between wage inequality and the policy positions held by right parties. By contrast, household disposable income inequality is associated with more rightist right parties at low and medium levels of low-income mobilization, while there is no significant association between household income inequality and the policy positions held by left parties. It should be noted at the outset that our regression analysis controls for the center of political gravity. It is commonplace to observe that the entire political spectrum is farther to the left or, alternatively, that redistributive policies are more generally accepted in some countries (say, Sweden) than in others (say, the United States). It is also commonplace to observe that politics in most industrialized countries shifted to the right and that redistributive policies became more contested in the 1980s and 1990s. For reasons that we elaborate later, we do not believe that these broad cross-national differences and trends can be explained in terms of contemporary income distribution patterns. To discern the common and significant political effects of inequality, we must control for the center of political gravity in different countries and different years. The next section articulates our theoretical framework. We then discuss the data set we have constructed to test our hypotheses and specify how the variables employed in our regression analysis are measured. The next section presents and discusses the results, and the following section explores patterns in the data that pertain to changes in inequality and partisan politics in specific countries over the 1980s and 1990s. We conclude with some thoughts about the implications of our analysis and directions for future research.
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