Real Estate Papers

Document Type

Journal Article

Date of this Version

10-2013

Publication Source

The Review of Economics and Statistics

Volume

95

Issue

4

Start Page

1291

Last Page

1302

DOI

10.1162/REST_a_00332

Abstract

The income distribution in many developed countries widened dramatically from 1970 to 2000. Some scholars argue that income inequality contributes to a host of social ills by undermining voters' willingness to support public expenditures. In contrast, we find that growing income inequality is associated with an expansion in government revenues and expenditures on a wide range of services in U.S. municipalities and school districts. Results are robust to a number of model specifications, including instrumental variables that address the endogeneity of the local income distribution. Our results are inconsistent with models predicting that heterogeneous societies provide lower levels of public goods.

Copyright/Permission Statement

© 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Share

COinS
 

Date Posted: 27 November 2017

This document has been peer reviewed.