Public Goods and Ethnic Divisions
Posted: 13 Dec 1997
Date Written: September 1997
We present a model that links heterogeneity of preferences across ethnic groups in a city to the amount and type of public good the city supplies. We test the implications of the model with three related datasets: U.S. cities, U.S. metropolitan areas, and U.S. urban counties. Results show that productive public goods--education, roads, sewers and trash pickup--in U.S. cities (metro areas/urban counties) are inversely related to the city's (metro area's/county's) ethnic fragmentation, even after controlling for other socioeconomic and demographic determinants. Ethnic fragmentation is negatively related to the share of local spending on welfare, and the results are mainly driven by observations in which majority whites are reacting to varying sizes of minority groups. We conclude that ethnic conflict is an important determinant of local public finances.
JEL Classification: H4, O1, O18, P16
Suggested Citation: Suggested Citation