Abstract:
Recent research has demonstrated that US states are bellwethers of national institutional decline, acting as 'laboratories of autocratisation' through voter repression and gerrymandering. We provide the first evidence on the economic consequences of sub-national democratic backsliding in the United States. We find that backsliding episodes during 2000-2023 do not systematically lead to a reduction in per capita income but do cause an increase in inequality and impoverishment. Innovation efforts (business R&D expenditure) and outputs (patenting) contract substantially, undermining the endogenous growth engine of the economy. International exports are unaffected, which suggests that foreign accountability operates through national-level institutions rather than sub-national ones.