Public Financing and Racial Disparities: Do Rising Tides Always Lift All Boats?

57 Pages Posted: 4 Apr 2022 Last revised: 28 Jul 2023

See all articles by Tian Qiu

Tian Qiu

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: August 1, 2021

Abstract

This paper studies the heterogeneous impact of local government spending across race groups. An exogenous increase in spending results in significant improvement in low-income White, but not low-income Black or Hispanic, labor market outcomes such as employment rate, hours worked, and labor income. These effects on parents translate into children's academic performance. White students show significant improvement in test scores, but Black or Hispanic students do not. Consequently, the achievement racial gap widens following the increase in local government spending. These results highlight the possibility that an increase in local government spending could unexpectedly increase intergenerational racial disparity.

Keywords: Municipal Finance, Labor Market Outcomes, Test Scores, Racial Gap

JEL Classification: I21, I24, H74

Suggested Citation

Qiu, Tian, Public Financing and Racial Disparities: Do Rising Tides Always Lift All Boats? (August 1, 2021). Available at SSRN: https://ssrn.com/abstract=4053726 or http://dx.doi.org/10.2139/ssrn.4053726

Tian Qiu (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

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