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Racial heterogeneity and Medicaid expenditure in the U.S. States: A longitudinal analysis

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  • Lee, Soomi

Abstract

This study investigates the relationship between racial heterogeneity and Medicaid spending as a share of state public expenditures in the U.S. states from 2000 to 2010. Extant studies predict that increasing racial heterogeneity reduces the share of expenditure on “productive public goods” such as health and education spending. The relationship, however, has been inadequately examined in the previous research because (1) the use of a cross-section dataset in previous research makes it difficult to draw a causal inference, (2) previous research does not sufficiently discuss the magnitude of the effect, (3) it uses aggregate expenditure data which do not distinguish between programs that benefit targeted groups vs. the general public, and (4) previous research does not take political representation bias into consideration. My paper offers the first longitudinal analysis to examine a causal effect of racial heterogeneity on Medicaid expenditure at the U.S. state level. Using state panel data from 2000 to 2010, I find that racial heterogeneity has a negative and statistically significant effect on Medicaid's share within a state's budget. The fiscal impact is also economically significant.

Suggested Citation

  • Lee, Soomi, 2013. "Racial heterogeneity and Medicaid expenditure in the U.S. States: A longitudinal analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 45(C), pages 28-37.
    • Handle: RePEc:eee:soceco:v:45:y:2013:i:c:p:28-37
    DOI: 10.1016/j.socec.2013.04.004
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    References listed on IDEAS

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    1. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1243-1284.
    2. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June.
    3. Ruffle, Bradley J. & Sosis, Richard, 2006. "Cooperation and the in-group-out-group bias: A field test on Israeli kibbutz members and city residents," Journal of Economic Behavior & Organization, Elsevier, vol. 60(2), pages 147-163, June.
    4. Habyarimana, James & Humphreys, Macartan & Posner, Daniel N. & Weinstein, Jeremy M., 2007. "Why Does Ethnic Diversity Undermine Public Goods Provision?," American Political Science Review, Cambridge University Press, vol. 101(4), pages 709-725, November.
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    More about this item

    Keywords

    Racial heterogeneity; Public good provision; Medicaid spending;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • Z1 - Other Special Topics - - Cultural Economics

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