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

Tian Qiu

American Economic Journal: Economic Policy, 2025, vol. 17, issue 4, 331-53

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's 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.

JEL-codes: H74 H75 I22 I26 J15 J22 J31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/pol.20220480

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