Ideological sorting

Abstract

This paper presents a model in which people sort between two districts based on economic and ideological preferences. People are either ideologues who prefer redistribution over a public good or non-ideologues who prefer a public good that benefits everyone equally. Individuals differ in their productivity with the distribution of productivities the same for both ideologues and non-ideologues. Ideologues back their ideology by working harder when there is redistribution even when not recipients, and non-ideologues work harder when the public good is provided. The tax rate in each district is chosen by majority rule with the median voter theorem identifying the winner. In the focal equilibrium, high productivity ideologues and non-ideologues locate together in a low tax district, and low productivity non-ideologues and ideologues locate together in a high tax district to benefit from redistribution. Middle-income individuals separate with non-ideologues locating in the low tax district and ideologues locating in the high tax district. Ideology thus results in a polarization interval in the middle of the income distribution. If ideology leads to partisanship and a strong party government that chooses the tax rate based on the party median, partisanship widens the polarization interval.