IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v95y2013i4p1291-1302.html
   My bibliography  Save this article

The Effect of Rising Income Inequality on Taxation and Public Expenditures: Evidence from U.S. Municipalities and School Districts, 1970–2000

Author

Listed:
  • Leah Boustan

    (UCLA and NBER)

  • Fernando Ferreira

    (Wharton School, University of Pennsylvania, and NBER)

  • Hernan Winkler

    (World Bank)

  • Eric M. Zolt

    (UCLA School of Law)

Abstract

The income distribution in many developed countries widened dramatically from 1970 to 2000. Some scholars argue that income inequality contributes to a host of social ills by undermining voters' willingness to support public expenditures. In contrast, we find that growing income inequality is associated with an expansion in government revenues and expenditures on a wide range of services in U.S. municipalities and school districts. Results are robust to a number of model specifications, including instrumental variables that address the endogeneity of the local income distribution. Our results are inconsistent with models predicting that heterogeneous societies provide lower levels of public goods. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Leah Boustan & Fernando Ferreira & Hernan Winkler & Eric M. Zolt, 2013. "The Effect of Rising Income Inequality on Taxation and Public Expenditures: Evidence from U.S. Municipalities and School Districts, 1970–2000," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1291-1302, October.
  • Handle: RePEc:tpr:restat:v:95:y:2013:i:4:p:1291-1302
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00332
    File Function: link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Abigail Payne & Justin Smith, 2015. "Does income inequality increase charitable giving?," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 793-818, May.
    2. Enamorado, Ted & López-Calva, Luis F. & Rodríguez-Castelán, Carlos & Winkler, Hernán, 2016. "Income inequality and violent crime: Evidence from Mexico's drug war," Journal of Development Economics, Elsevier, vol. 120(C), pages 128-143.
    3. Feler, Leo & Senses, Mine Zeynep, 2016. "Trade Shocks and the Provision of Local Public Goods," IZA Discussion Papers 10231, Institute for the Study of Labor (IZA).
    4. Sarah J. Reber, 2014. "Comment on "Explaining Trends in High School Graduation: The Changing Elementary and Secondary Education Policy Landscape and Income Inequality over the Last Half Century"," NBER Chapters,in: Human Capital in History: The American Record, pages 89-95 National Bureau of Economic Research, Inc.
    5. Brian Beach & Daniel B. Jones, 2017. "Gridlock: Ethnic Diversity in Government and the Provision of Public Goods," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 112-136, February.
    6. Richard J. Murnane & Sean F. Reardon, 2017. "Long-Term Trends in Private School Enrollments by Family Income," NBER Working Papers 23571, National Bureau of Economic Research, Inc.
    7. Paola Giuliano & Antonio Spilimbergo, 2009. "Growing Up in a Recession: Beliefs and the Macroeconomy," NBER Working Papers 15321, National Bureau of Economic Research, Inc.
    8. Rajashri Chakrabarti & Max Livingston & Joydeep Roy, 2014. "Did Cuts in State Aid During the Great Recession Lead to Changes in Local Property Taxes?," Education Finance and Policy, MIT Press, vol. 9(4), pages 383-416, October.
    9. Benoît LE MAUX & Kristýna DOSTÁLOVÁ & Fabio PADOVANO, 2017. "Ideology and Public Policies: A Quasi-Experimental Test of the Hypothesis that Left-Wing Governments Spend More," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2017-01-ccr, Condorcet Center for political Economy.
    10. Brice Fabre, 2018. "The Impact of Local Income Inequality on Public Goods and Taxation: Evidence from French Municipalities," PSE Working Papers halshs-01721825, HAL.
    11. repec:eee:poleco:v:52:y:2018:i:c:p:1-17 is not listed on IDEAS
    12. Baum-Snow, Nathaniel & Ferreira, Fernando, 2015. "Causal Inference in Urban and Regional Economics," Handbook of Regional and Urban Economics, Elsevier.
    13. Neil Buckley & Katherine Cuff & Jeremiah Hurley & Stuart Mestelman & Stephanie Thomas & David Cameron, 2013. "Support for Public Provision with Top-Up and Opt-Out: A Controlled Laboratory Experiment," Department of Economics Working Papers 2013-15, McMaster University.
    14. Melissa S. Kearney & Phillip B. Levine, 2016. "Income Inequality, Social Mobility, and the Decision to Drop Out of High School," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 333-396.
    15. Leah Platt Boustan & Carola Frydman & Robert A. Margo, 2014. "Introduction to "Human Capital in History: The American Record"," NBER Chapters,in: Human Capital in History: The American Record, pages 1-14 National Bureau of Economic Research, Inc.
    16. Kosec, Katrina, 2014. "Relying on the private sector: The income distribution and public investments in the poor," Journal of Development Economics, Elsevier, vol. 107(C), pages 320-342.
    17. Islam, Md. Rabiul & Madsen, Jakob B. & Doucouliagos, Hristos, 2018. "Does inequality constrain the power to tax? Evidence from the OECD," European Journal of Political Economy, Elsevier, vol. 52(C), pages 1-17.
    18. Nora Gordon, 2014. "Explaining Trends in High School Graduation: The Changing Elementary and Secondary Education Policy Landscape and Income Inequality over the Last Half Century," NBER Chapters,in: Human Capital in History: The American Record, pages 59-89 National Bureau of Economic Research, Inc.
    19. Buckley, Neil & Cuff, Katherine & Hurley, Jeremiah & Mestelman, Stuart & Thomas, Stephanie & Cameron, David, 2015. "Support for public provision of a private good with top-up and opt-out: A controlled laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 177-196.
    20. Nora E. Gordon, 2013. "High School Graduation in the Context of Changing Elementary and Secondary Education Policy and Income Inequality: The Last Half Century," NBER Working Papers 19049, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    income inequality; income distribution; taxation; public expenditures; school districts;

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:95:y:2013:i:4:p:1291-1302. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ann Olson). General contact details of provider: https://www.mitpressjournals.org/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.