Working Paper: NBER ID: w16299
Authors: Leah Platt Boustan; Fernando Ferreira; Hernan Winkler; Eric Zolt
Abstract: The income distribution in many developed countries widened dramatically from 1970 to 2000. Scholars speculate that inequality contributes to a host of social ills by weakening the public sector. In contrast, we find that growing income inequality is associated with an expansion in revenues and expenditures on a wide range of services at the municipal and school district levels in the United States. These results are robust to a number of model specifications, including instrumental variables that deal with the endogeneity of local expenditures. Our results are inconsistent with models that predict heterogeneous societies provide lower levels of public goods.
Keywords: Income Inequality; Local Government; Public Expenditures; Municipal Finances; School Districts
JEL Codes: H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| income inequality (D31) | municipal revenues (H70) |
| income inequality (D31) | municipal expenditures (H76) |
| Gini coefficient (D31) | municipal expenditures per resident (H76) |
| income inequality (D31) | property tax revenue per pupil (H71) |
| income inequality (D31) | state transfers (H77) |
| income inequality (D31) | public goods provision (H41) |