Economic Insecurity Increases Polarization and Decreases Trust

Rising political polarization and public distrust are believed to erode democratic norms and institutions, and known to be correlated with worrisome social, economic, and political conditions. However, the causes of polarization and distrust are not well understood, and subject to competing hypotheses. In this article, we test empirical support for one such hypothesis linking increasing polarization to economic insecurity. Under this hypothesis, economic insecurity is expected to increase individual risk aversion leading to a decrease in out-group interactions and therefore to rising polarization within a society. We empirically test predictions of this model globally at the country and individual level. Furthermore, we exploit exogenous variation in European individuals' exposure to Chinese import shocks to establish a causal relation between economic insecurity and decreasing trust. We find that economic insecurity, in the form of income inequality and unemployment at the macro-level, and perceived economic insecurity at the individual level, are associated with increases of affective polarization, and of public distrust.