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The Effect of Ethnic Diversity on Municipal Spending

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  • Jannett Highfill

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  • Kevin O’Brien

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Abstract

This paper examines the effect of ethnic diversity on municipal spending, taxes, and employment, as well as on municipal spending in various subcategories. Previous work has found that diversity is associated with decreased productive spending but increased overall spending and employment. The goal of this paper is to investigate whether these opposing effects are found for two different levels of diversity. The first considers broad ethnic groups like non-Hispanic white, black, and Hispanic. The second considers more focused diversity, the various subgroups making up the white category. We find that greater broad diversity increases municipal spending and taxes, spending on all of the specific productive goods, and sometimes on protective or redistributive services. Greater focused diversity, on the other hand, decreases municipal spending and spending on one redistributive service but increases spending on another. Copyright International Atlantic Economic Society 2015

Suggested Citation

  • Jannett Highfill & Kevin O’Brien, 2015. "The Effect of Ethnic Diversity on Municipal Spending," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 305-318, September.
  • Handle: RePEc:kap:atlecj:v:43:y:2015:i:3:p:305-318 DOI: 10.1007/s11293-015-9469-z
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    References listed on IDEAS

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    1. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
    2. Alesina, Alberto & Baqir, Reza & Easterly, William, 2000. "Redistributive Public Employment," Journal of Urban Economics, Elsevier, vol. 48(2), pages 219-241, September.
    3. repec:hrv:faseco:4553034 is not listed on IDEAS
    4. Vigdor, Jacob L., 2002. "Interpreting ethnic fragmentation effects," Economics Letters, Elsevier, vol. 75(2), pages 271-276, April.
    5. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, pages 207-234.
    6. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
    7. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
    8. Lynn MacDonald, 2008. "The impact of government structure on local public expenditures," Public Choice, Springer, vol. 136(3), pages 457-473, September.
    9. Cutler, David M & Elmendorf, Douglas W & Zeckhauser, Richard J, 1993. "Demographic Characteristics and the Public Bundle," Public Finance = Finances publiques, , vol. 48(Supplemen), pages 178-198.
    10. Alberto Alesina & Reza Baqir & Caroline Hoxby, 2004. "Political Jurisdictions in Heterogeneous Communities," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 348-396, April.
    11. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
    12. Olugbenga Ajilore & John Smith, 2011. "Ethnic fragmentation and police spending," Applied Economics Letters, Taylor & Francis Journals, vol. 18(4), pages 329-332.
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    More about this item

    Keywords

    R1; J15; H7; R5; Ethnic heterogeneity; Diversity; Municipal government; Productive government spending; Redistributive government spending;

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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