Political Polarization and Finance / Elisabeth Kempf, Margarita Tsoutsoura.

Format:

Book

Author/Creator:

Kempf, Elisabeth.

Contributor:

Tsoutsoura, Margarita.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w32792.

NBER working paper series no. w32792

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2024.

Summary:

We review an empirical literature that studies how political polarization affects financial decisions. We first discuss the degree of partisan segregation in finance and corporate America, the mechanisms through which partisanship may influence financial decisions, and available data sources to infer individuals' partisan leanings. We then describe and discuss the empirical evidence. Our review suggests an economically large and often growing partisan gap in the financial decisions of households, corporate executives, and financial intermediaries. Partisan alignment between individuals explains team and financial relationship formation, with initial evidence suggesting that high levels of partisan homogeneity may be associated with economic costs. We conclude by proposing several promising directions for future research.

Notes:

August 2024.

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