SHORT ARTICLE Inequality Growth and Economic Policy Liberalism: An Updated Test of a Classic Theory Benjamin J. Newman, University of California, Riverside Long-standing political economy theory argues that increases in economic inequality will increase public demand for liberal economic policy. Empirical support for this proposition is relatively inconsistent, though, with the result being uncertainty about the validity of the theory. Since the inception of such theory, however, scholarship has rendered new insights about how to conceptualize the most theoretically plausible measure of exposure to inequality. In contrast to prior work, which largely focuses on citizens’ responses to what may now be viewed as an implausible measure, national-level inequality, this article focuses on what this literature suggests to be a more plausible measure: inequality growth in citizens’ local context. Using national panel data, this article offers a theoretically updated and more rigorous test of the redistributive democracy hypothesis. The results demonstrate that drastic increases in local income in- equality are associated with increasing support for liberal economic policy. O ne of the central puzzles in the study of American politics is the unabated growth in economic in- equality over the past half a century. In attempting to grapple with this trend, a primary question explored by scholars is the relationship between economic inequality and mass support for redistribution. Long-standing theories, such as the Meltzer-Richard (MR) model, argue that increases in inequality will lead to increases in public demand for redis- tribution (Meltzer and Richard 1981); however, empirical research has rendered mixed support for this prediction, with some studies offering corroborating evidence (Dallinger 2010; Finseraas 2009; Schmidt-Catran 2016) and others disconfirm- ing evidence (Kelly and Enns 2010; Kenworthy and McCall 2008; Lubker 2007). In the United States, which is prominent for having high levels of inequality and low levels of redis- tribution relative to peer nations (Brandolini and Smeeding 2006), there is even evidence that increases in inequality lead to decreased support for redistribution (Kelly and Enns 2010)— although this work is also met with countervailing evidence (Grant and Lebo 2016; Johnston and Newman 2016). While the literature contains a handful of studies that confirm the pre- dictions of the MR model, the bulk of the research yield either null or opposing results, with the outcome being uncertainty about the validity of the model. As noted by Franko (2016), the “collective results of these studies do not provide a coherent account of how people respond to rising inequality” (957). In this short article, I address key limitations in previous research and offer an unprecedented test of the effect of in- equality growth on economic policy preferences. I offer a critique of how inequality as a contextual effect has been conceptualized and argue that the predominant conceptuali- zation and empirical operationalization is based on prob- lematic assumptions about citizens’ awareness of nationwide economic conditions. Specifically, I argue that, despite the diversity of data used, the predominant reliance in prior scholarship on national-level inequality offers a suboptimal test of the effect of inequality on public opinion because the level of, or year-to-year changes in, nationwide income in- equality is unlikely to be perceived by citizens. Aside from specifying a contextual effects hypothesis in which the context in question is a massive geographic unit (i.e., country), many tests focus on citizens’ reactions to the level of inequality, whereas source theories, such as the MR model, emphasize over-time growth in inequality. Moreover, numerous tests of Benjamin J. Newman (bnewman@ucr.edu) is an associate professor in the School of Public Policy and Department of Political Science at the University of California, Riverside, Riverside, CA 92521. No external financial support was received. Data and supporting materials necessary to reproduce the numerical results in the article are available in the JOP Dataverse (https://dataverse.harvard.edu/dataverse/jop). An online appendix with supplementary material is available at https://doi.org/10.1086/706598. The Journal of Politics, volume 82, number 2. Published online January 14, 2020. https://doi.org/10.1086/706598 q 2020 by the Southern Political Science Association. All rights reserved. 0022-3816/2020/8202-00XX$10.00 000 This content downloaded from 138.023.234.250 on January 25, 2020 14:51:21 PM All use subject to University of Chicago Press Terms and Conditions (http://www.journals.uchicago.edu/t-and-c).