Ethnic Diversity and Public Goods: Evidence from U.S. Municipalities and School Districts, 2000-2010

This paper examines the claim that ethnic heterogeneity reduces government spending on various local public goods. Our analysis suggests that higher ethnic 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 a robust, positive impact on various types of local government spending.