Political Polarisation

Polarisation is not only a feature of political and social preferences – it can also disrupt the behavioural and institutional foundations of democratic governance. We examine its consequences across three broad areas: (i) democratic backsliding, or the erosion of informal norms and institutional checks that constrain power and safeguard pluralism; (ii) accountability failures, as polarisation distorts how citizens process information, evaluate leaders, and respond to evidence of poor performance; and (iii) heightened policy uncertainty, which can affect investment and economic stability.

Democratic backsliding

A growing body of evidence suggests that political polarisation poses a serious threat to democratic institutions. Polarisation can erode informal norms – mutual tolerance, forbearance, and respect for institutional constraints – that sustain democratic governance (Haggard 2021, Lee 2022). As voters begin to perceive political opponents as existential threats, they become more tolerant of norm violations by their own side, increasing the appeal of populist or anti-democratic candidates (Guriev and Papaioannou 2022).

Importantly, the type of polarisation matters. Using data from 170 national election surveys across 53 countries, Orhan (2022) descriptively finds that affective polarisation – but not ideological polarisation – is significantly correlated with democratic backsliding, as measured by V-Dem’s Liberal Democracy Index.

This shift in voter sentiment creates a permissive environment for elite overreach. Experimental evidence from the US finds that affectively polarised citizens are more willing to support candidates who violate democratic rules if doing so prevents the opposition from gaining power (Graham and Svolik 2020). Similarly, Druckman et al. (2023) show that citizens systematically overestimate the extremism of political opponents and use these misperceptions to justify their own party’s norm-breaking behaviour.

Over time, these dynamics can accelerate institutional decline. Leaders may concentrate power under the guise of self-defence, weakening checks and balances. In countries with fragile institutional environments, polarisation among elites can even increase incentives for political violence. Esteban et al. (2015) link high ethnic polarisation and weak rent-sharing to increased risk of mass violence, highlighting the role of elite fragmentation in fuelling instability.

Emerging evidence suggests that polarisation is not just deepening but changing in form. Draca and Schwarz (2024) document the rise of ideological “clusters” marked by systemic distrust and disaffection with institutions, potentially heightening the appeal of populist disruption and weakening citizen commitment to democratic norms.

Accountability and Governance

Polarisation also distorts accountability by shaping how citizens access, interpret, and respond to information about government performance. In theory, ideological diversity in the media can improve monitoring and inform electoral choices (e.g. Ferraz and Finan 2008, Arias et al. 2022, Enríquez et al. 2024). But in polarised environments, citizens increasingly consume news from ideologically aligned sources (Gentzkow and Shapiro 2010, Braghieri et al. 2025) and avoid information that contradicts their political views, even when they recognise that aligned sources may be biased (Alonso and Padró i Miquel 2025).

This pattern reflects both selective exposure – seeking out information that aligns with their views (Prior 2013, Iyengar et al. 2019), and selective interpretation – the tendency to dismiss counter-attitudinal content through motivated reasoning (Benabou and Tirole 2016, Groenendyk and Krupnikov 2021, Taber and Lodge 2006) or moderate their belief updating, even when applying Bayesian reasoning (Cheng and Hsiaw 2022, Gentzkow et al. 2025). In some cases, this can result in backlash, where exposure to counter-attitudinal information strengthens their pre-existing beliefs instead of weakening them.

As a result, voters in polarised contexts are less likely to punish underperforming incumbents, and in some cases, counter-attitudinal information can even backfire in terms of how individuals are expected to react to hold their elected officials to account (Baysan 2022, Enriquez et al. 2025), polarising individuals further (Groenendyk and Krupnikov 2021, Baysan 2022). For example, Enriquez et al. (2025) show experimentally that information indicating relatively poor incumbent performance in the handling of the COVID-19 pandemic leads to increased electoral support for the incumbent among partisan voters in Mexico. Similar dynamics are documented in other polarised contexts, where performance information fails to shift vote choices or even increases partisan entrenchment (Baysan 2022). Paralleling the results on affective versus ideological polarisation on democratic backsliding in the previous section, Orhan (2022) finds descriptively that affective polarisation – but not ideological polarisation – also appears to weaken accountability.

These findings suggest that polarisation undermines one of the central promises of democratic governance: that voters will discipline leaders based on performance. Where affective divisions are strong, information campaigns and transparency reforms may have limited effects – or even counterproductive ones – unless paired with strategies to reduce partisan hostility or reframe civic identity.

Policy Uncertainty, Economic Stability, Investment

Political polarisation can heighten policy uncertainty, with broad implications for economic stability and development. Baker et al. (2014) attribute part of the steady increase in US policy uncertainty to increased political polarisation due to its implications for the policymaking process and policy choices. Similarly, Baker et al. (2020) use a panel of 23 countries to show that policy uncertainty increases during election periods, and especially in closely contested and polarised settings.

This uncertainty is reflected not only in macroeconomic indicators but also in how individuals perceive and respond to economic conditions. Coibion et al. (2020) show that individuals’ expectations for inflation, unemployment, and economic growth vary based on whether their preferred party is in power. These divergent expectations suggest that polarisation distorts not just elite signals, but also how ordinary citizens interpret economic fundamentals.

A growing literature in macroeconomics explores the broader consequences of this uncertainty. Kempf and Tsoutsoura (2024) review evidence that polarisation affects firm behaviour, investor decisions, and the allocation of capital in both the US and other advanced democracies. For example, Azzimonti (2018) constructs an index of US partisan conflict using media coverage and finds that polarisation is associated with declines in aggregate investment.

Cross-national work similarly finds that polarisation can undermine foreign direct investment and fiscal flexibility. Ginn and Saadaoui (2025) find that party polarisation is correlated with reduced FDI inflows in parliamentary democracies, particularly in settings with weaker institutions. Grechyna (2021) models how polarisation limits governments’ ability to respond to economic shocks and macroeconomic volatility. These patterns underscore the need to expand this research agenda to low- and middle-income countries, where policy tools may be more limited and economic shocks more destabilising.

For full reference list see the end of the conclusion chapter.