The Wealth of Democratic Participation: Measuring Within-Individual Political-Economic Engagement

The Wealth of Democratic Participation: Measuring Within-Individual Political-Economic Engagement

Carlos F. Avenancio-León, Yutao He

Working paper

2025

This paper explores the inherent connection between political engagement and wealth accumulation among ordinary homeowners. We document a robust, positive, and monotonic relationship between individual housing returns and the number of times an individual democratically participates. We first rule out that this relationship is driven by location or neighborhood effects, individual-level income, individual-levelwealth, individual-level demographic characteristics (e.g., gender, race, age, or partisan affiliation), or by a causal effect of housing returns on political engagement. We then showthat the political-economic engagement relationship is driven by behavior that requires active participation: purchasing undervalued properties within a neighborhood or timing the housing market. The politically engaged have higher levels of education but, paradoxically, education does not explain their housing market performance. Instead, we present suggestive evidence that individual-level factors typically correlated with education – such as financial literacy, large-stakes risk aversion/tolerance, and behavioral traits – might play a role in explaining this relationship. Overall, we quantify that the politically-economically engaged subset of the population represents around 30% of eligible voters, and their behavior accounts for 53% of all voter registrations and 63% of the annual growth in aggregate housing wealth (around $1.15 trillion or 5% of GDP in 2020). Our findings contribute to the literature on determinants of political engagement by emphasizing the fundamental interconnection between economic and political behaviors at the individual level, moving beyond traditional resource-based or demographic explanations. Furthermore, our analysis extends research on democracy and national wealth (Acemoglu, Naidu, Restrepo, and Robinson 2019; Barro 1996) by suggesting individual-level motivations or beliefs as potential microfoundations for the broader, country-level association between democratic participation and economic growth.