Ethnic Diversity and Public Goods Provision

Abstract

We revisit the claim that ethnic heterogeneity-the degree to which different ethnic groups make up the population-reduces local government spending on various public goods. Our analysis suggests that heterogeneity does not necessarily reduce local public spending due to two factors: (1) the low price elasticity of demand for local public goods and (2) the substitution between public goods. Using data from American cities and school districts from 2000 to 2010, we find that ethnic heterogeneity has offsetting positive and negative effects on various types of local government spending. Our findings imply that local governments respond to an increase in ethnic heterogeneity by rebalancing local public spending-for instance, adopting a policy that reallocates resources from roads to police and fire protection.

Overcoming Resource Competition Among Co-Ethnics: Elites, Endorsements, and Multiracial Support for Urban Distributive Policies

“…Similarly, Lee, Lee, and E Borcherding (2016) find that cities are strategic in what types of public goods they fund when faced with diverging policy preferences from an ethnically diverse population. They argue that city expenditures on public goods within the context of an ethnically diversifying population are determined by the price-elasticity of a specific good, whether there are more viable private substitutes for a public good or whether there are fewer substitutes.…”

“…Our results also fit into the broader literature on the challenges ethnically diverse cities and their leaders face in providing goods and services to their residents. A wide range of literature has found that as cities become more ethnically diverse, levels of city funding for public goods tend to decrease (Alesina, Baqir, and Easterly, 1999;An, Levy, and Hero, 2018;Habyarimana et al, 2007;Lee, Lee, and Borcherding, 2016;Rugh and Trounstine, 2011). Scholars have attributed this to the role racial group identities have in shaping Americans' perceptions of (re) distributive policy and how these policies benefit groups they identify with or dislike.…”

Ethnicity is not public service destiny: The political logic of service distribution in South Africa

“…Some studies point to the sensitivity of the approach's cross-country research designs (Bharathi et al 2020;Gao 2016;Gerring et al 2015;Gisselquist et al 2016;Lee 2018), 3 while others find little or no relationship between diversity and public goods at the national level, instead detecting a positive relationship within countries (Bharathi et al 2020;Gao 2016;Gerring et al 2015;Gibson and Hoffman 2013;Gisselquist et al 2016;Lee 2018). One reason for this could be that most governments have decentralized some public service provision to local governments and in most settings combinations of provincial, district, and local governments co-finance public services (Bharathi et al 2020;Lee et al 2016). Some recent empirical work doubts the basic assumptions of the diversity deficit: co-ethnics may not be more pro-social with each other than non-co-ethnics (e.g.…”

How status inequality between ethnic groups affects public goods provision: Experimental evidence on caste and tolerance for teacher absenteeism in India

“…And yet this thesis about the negative impact of ethnic diversity on public goods provision has been powerfully challenged in recent years (see Singh & vom Hau 2016). There is a growing body of empirical evidence that ethnic diversity does not dampen state provision, including from the cases on which the most seminal formulations of the "diversity-development deficit" were based-US cities (Hopkins 2011;Lee et al 2015;Rugh & Trounstine 2011;Trounstine 2013) and African states (Miguel 2004;Gibson & Hoffman 2013;Gisselquist et al 2014). Scholars have also suggested that the impact of ethnic diversity on public goods provision varies by ethnic cleavage (Alesina et al 2003;Chaves and Gorski 2001;Singh 2011Singh , 2016, type of public good (Gisselquist 2014), and unit of analysis (Gerring et al 2015).…”