Income segregation's impact on local public expenditures: Evidence from municipalities and school districts, 1980–2010

• Published in: Regional science and urban economics Vol. 90; p. 103710
• Main Author: Gallagher, Ryan M.
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.09.2021; Elsevier Sequoia S.A
• Subjects: Collective action; Economic inequality; Government size; Government spending; Income distribution; Income inequality; Income segregation; Income taxes; Inequality; Jurisdiction; Local public finance; Public choice; Public sector; Research methodology; Residential segregation; School district finance; School districts; Segregation; Spatial analysis; Studies; Wealth; Wealth distribution; United States > US; R2; Income inequality; R5; Government size; Local public finance; School district finance; Income segregation; H7
• ISSN: 0166-0462; 1879-2308
• DOI: 10.1016/j.regsciurbeco.2021.103710

Residential income segregation within local political jurisdictions has risen considerably since 1980 in the U.S. Despite this trend, and a growing body of research on wealth inequality and its impact on public sector size, income segregation's own influence over local public choice has not been thoroughly investigated. Using block-group income distributions for the years 1980, 1990, 2000, and 2010 income segregation is measured for individual U.S. municipalities and school districts, where the spatial distribution of income may carry the most political relevance. Estimates indicate that rising income segregation reduced per-capita spending growth considerably for both municipalities and school districts. These findings are robust to various model specifications and to the use of instrumental variables that adjust for the potential endogeneity of local income segregation. This evidence is consistent with the view that intra-jurisdictional income segregation undermines trust between community members and complicates collective action. However, a-spatial income inequality continues to be positively correlated with local public sector size, as suggested by recent empirical research. •Income segregation within U.S. local political jurisdictions has grown since 1980.•Income segregation raises the potential for political conflict.•Income segregation reduces per-capita spending within cities and school districts.