Rising wealth concentration and democratic backsliding across U.S. states

Wealth concentration in the United States has reached heights not seen since the Gilded Age, renewing fears that concentrated economic power may undermine democracy. Yet empirical research linking inequality to democratic erosion remains inconclusive, partly because most studies focus on cross-country comparison and examine income rather than wealth. This study exploits variation across fifty U.S. states; each embedded in a common federal framework but differing in political and economic dynamics. To estimate the exogenous effect of rising wealth concentration on democratic backsliding, I develop a shift-share instrument of state-level millionaire wealth shares. Results reveal a clear, negative effect on democratic performance. Causal mediation analysis demonstrates that the effect is mediated by the share of seats held by Republicans in state legislatures, pointing to a mechanism of elite influence through partisan channels. These findings demonstrate that subnational wealth disparities, and their convergence with partisan politics, actively erode American democratic institutions.