Public Financing and Racial Disparities: Does A Rising Tide Always Lift All Boats?

Qiu, Tian

doi:10.1257/pol.20220480

Abstract

This paper studies the heterogeneous impact of local government spending across racial groups. An exogenous increase in spending results in significant improvement in White, but not Black or Hispanic, labor market outcomes such as employment rate, weekly hours worked, and labor income. These effects on adults translate into their children鈥檚 academic performance. White students show significant improvement in test scores, but Black or Hispanic students do not. Consequently, the achievement racial gap widens following an increase in local government spending. These results highlight the possibility that an increase in local government spending could unexpectedly increase intergenerational racial disparity.

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