Working Paper: NBER ID: w16097
Authors: Sean Corcoran; William N. Evans
Abstract: Using a panel of U.S. school districts spanning 1970 - 2000, we examine the relationship between income inequality and fiscal support for public education. In contrast with recent theoretical and empirical work suggesting a negative relationship between inequality and public spending, we find results consistent with a median voter model, in which inequality that reduces the median voter's tax share induces higher local spending on public education. We estimate that 12 to 22 percent of the increase in local school spending over this period is attributable to rising inequality.
Keywords: Income Inequality; Public Education; Median Voter Model
JEL Codes: H72; I21; I22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher per-student expenditure (H52) | greater local spending on education (H75) |
| rising income inequality (D31) | lower state aid per student (H75) |
| lower state aid per student (H75) | greater local spending on education (H75) |
| rising income inequality (D31) | higher per-student expenditure (H52) |
| mean to median income ratio (D31) | local revenues per student (H79) |
| mean to median income ratio (D31) | increase in local revenues (H71) |