Economic Segregation and Local Service Provision in the United States

• In Event: Economic Segregation, Arrests, and Predatory Lending

Abstract

Neighborhoods within municipalities have long been divided by class lines in the United States, but patterns of economic segregation have started to shift. In recent decades, rich and poor households have increasingly sorted between municipalities. The scale at which economic segregation—the uneven distribution of income across geographic space—occurs has potentially immense consequences for the provision of local public services. Economic segregation shapes local residents’ needs and preferences for public services, as well as local governments’ incentives and capacity to provide them. Although public finance and political economy scholars have studied these relationships within municipalities, extant work on local service provision in the U.S. largely overlooks the effect of changes in the distribution of income across municipalities.

This paper examines how economic segregation between municipalities shapes local public service provision in U.S. metropolitan areas. I use income data from decennial Censuses and the 2008-2012 American Community Survey and expenditure data from the Censuses of State and Local Government Finances to create a panel dataset for 380 metropolitan areas between 1980 and 2010. I estimate income segregation between municipalities within metropolitan areas with an index called the rank-order information theory index. My results show that local governments in more segregated metropolitan areas collect and spend more on public services.

I will analyze the extent to which the relationship between economic segregation and aggregate expenditures differs by tax base. If high-income municipalities spend more in segregated metropolitan areas, economic segregation potentially exacerbates unequal investments between jurisdictions and subsequent disparities in health and wellbeing outcomes. If low-income municipalities spend more in segregated metropolitan areas, local governments may be charging taxes or fees that residents are unable to pay in the long-term. This paper thus sheds further light on why municipalities within the United States continue to be “separate and unequal” (Hill 1974).

Author

• Katy Hansen, Duke University