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Income Inequality and Local Government in the United States, 1970-2000

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  • 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16299.

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Date of creation: Aug 2010
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Publication status: published as “The Effect of Rising Income Inequality on Taxa tion and Public Expenditures: Evidence from US Municipalities and School Districts, 1970-2000,” with Fernando Ferreira, Hernan Winkler and Eric Zolt. Review of Economics and Statistics , 95 (2013), 1291–1302.
Handle: RePEc:nbr:nberwo:16299

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  1. Baicker, Katherine & Gordon, Nora, 2006. "The effect of state education finance reform on total local resources," Journal of Public Economics, Elsevier, Elsevier, vol. 90(8-9), pages 1519-1535, September.
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  4. Sean Corcoran & William N. Evans, 2010. "Income Inequality, the Median Voter, and the Support for Public Education," NBER Working Papers 16097, National Bureau of Economic Research, Inc.
  5. Dora L. Costa & Matthew E. Kahn, 2003. "Understanding the American Decline in Social Capital, 1952--1998," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 56(1), pages 17-46, February.
  6. Elizabeth Cascio & Nora Gordon & Ethan Lewis & Sarah Reber, 2009. "Paying for Progress: Conditional Grants and the Desegregation of Southern Schools," NBER Working Papers 14869, National Bureau of Economic Research, Inc.
  7. Rodney Ramcharan, 2010. "Inequality and Redistribution: Evidence from U.S. Counties and States, 1890-1930," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 729-744, November.
  8. Fajnzylber, Pablo & Lederman, Daniel & Loayza, Norman, 2002. "Inequality and Violent Crime," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 45(1), pages 1-40, April.
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  14. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, Elsevier, vol. 62(3), pages 297-325, November.
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Cited by:
  1. Francesco Vona & Francesco Nicolli & Lionel Nesta, 2012. "Determinants of Renewable Energy Innovation: environmental policies vs. market regulation," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2012-05, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Jorge Martinez-Vazquez & Blanca Moreno-Dodson & VIoleta Vulovic, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper1225, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
  4. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09j0h0ji242 is not listed on IDEAS
  5. Sidhakam BHATTACHARYYA & Gautam BANDYOPADHYAY, 2012. "Urban Local Bodies In India: Financial Control For Better Financial Performance," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 7(3), pages 24-37, August.

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