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Political Polarization and Finance

Author

Listed:
  • Elisabeth Kempf
  • Margarita Tsoutsoura

Abstract

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.

Suggested Citation

  • Elisabeth Kempf & Margarita Tsoutsoura, 2024. "Political Polarization and Finance," NBER Working Papers 32792, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32792
    Note: AP CF POL
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    Cited by:

    1. Pietro Battiston & Marco Magnani & Dimitri Paolini & Luca Rossi, 2025. "Country Music: Positional Voting and Strategic Behavior," Discussion Papers 2025/322, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    2. Michele Cascarano & Laura Sigalotti & Francesco Stradi, 2025. "EU views and household investments: evidence from the Brexit referendum," Temi di discussione (Economic working papers) 1504, Bank of Italy, Economic Research and International Relations Area.
    3. Libertad González & Luis Guirola & Blanca Zapater, 2026. "Partisan abortions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 39(1), pages 1-26, March.
    4. Deniz Igan & Thomas Lambert & Prachi Mishra & Eden Quxian Zhang, 2025. "The Politics of the Paycheck Protection Program," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 14(4), pages 1083-1122.
    5. Kuang, Pei & Luca, Davide & Wei, Zhiwu, 2025. "Ballots, Budgets and Bricks: Brexit and the Polarisation of Individual Economic Behaviours," MPRA Paper 125104, University Library of Munich, Germany.
    6. Pablo Ottonello & Wenting Song & Sebastian Sotelo, 2024. "An Anatomy of Firms’ Political Speech," NBER Working Papers 32923, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • G0 - Financial Economics - - General

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