This study investigates the impact of political polarization on output growth, capital formation, and foreign direct investment (FDI) across 139 economies via a panel Local Projections (LP) model. We examine whether the effects of political polarization vary by income group (advanced [AEs], emerging markets [EMs]) and by political regimes (democracy, autocracy). Our findings reveal that political polarization negatively affects output growth and capital formation, with adverse effect on FDI in EMs and autocracies, highlighting “hidden” economic costs of polarization.