Latent Polarization

We develop a new method to endogenously partition society into groups based on homophily in values, using fractional hedonic games as a theoretical foundation. The between-group differentiation that results from this partition provides a novel measure of latent polarization in society. We implement this method empirically using U.S. data from the World Values Survey. For the last forty years, the degree of latent polarization of the U.S. public has been high and relatively stable. In contrast, the degree of values polarization between voters of the two main political parties has steadily increased since the 1990s, and is now converging toward that of underlying values-based clusters. Thus, growing partisan polarization in the U.S. is a reflection of partisan views becoming increasingly aligned with the main values-based clusters in society.