NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

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

NBER Working Paper No. 16299
Issued in August 2010
NBER Program(s):   PE   POL

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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Document Object Identifier (DOI): 10.3386/w16299

Published: “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.

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