The Cost of Decentralization: Linguistic Polarization and the Provision of Education
43 Pages Posted: 15 Jun 2016
There are 2 versions of this paper
The Cost of Decentralization: Linguistic Polarization and the Provision of Education
The Cost of Decentralization: Linguistic Polarization and the Provision of Education
Date Written: May 12, 2016
Abstract
In this paper we argue that different preferences in a decentralized system lead to under provision of public goods. We analyze the provision of public primary education in nineteenth-century Prussia which was characterized by a linguistically polarized society and a decentralized education system. Using unique county-level data on education spending we show that linguistic polarization has a negative impact on local spending. Instrumental variable estimates using distance to the eastern border suggest that the relationship can be causally interpreted. Exploiting a reform of education spending, we show that centralization increases the provision of primary education relatively more in linguistically polarized counties.
Keywords: education, public goods, polarization, decentralization, centralization, Prussia
JEL Classification: H410, H750, I220, N130, N330
Suggested Citation: Suggested Citation