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

  • Leah Platt Boustan
  • Fernando Ferreira
  • Hernan Winkler
  • Eric Zolt

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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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
Date of revision:
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
Note: PE POL
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