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 | Dauphine, room A405 |
Can income shocks polarize? Theory and evidence from natural resource windfalls
We study the impact of income shocks on political polarization. Previous studies find that polarization increases during economic hardships. We present theory and evidence that point at an opposite perspective, vis-à-vis the case of natural resource windfalls. The latter provide a source of plausibly exogenous income effects that stimulate public debate. Our theoretical framework, based on a contest over public opinion, predicts that heightened exposure to public debates (connectivity) leads to elevated polarization by allowing extremists unbridled control over the discourse. We test the model’s predictions by employing detailed individual-level data covering the period 1964-2020, in conjunction with plausibly exogenous differences in natural resource endowments, as well as in connectivity levels, across U.S. states. Our baseline estimates show that a one standard deviation of state resource windfalls increases individuals’ average affective polarization by 4% in high-connectivity states. Our results shed light on the dynamics of polarization, as well as on hitherto overlooked adverse effects of natural resource abundance.
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