A Theory of Geography and Public Goods

• In Event: Local Politicians and Public Goods Provision

Abstract

Why does socioeconomic segregation affect the provision of certain public goods? Focusing on how segregation affects specifically voter preferences for public goods, I examine one mechanism behind the relationship: negative spatial externalities that spill over between income groups in heterogeneous (de-segregated) localities. Income inequality generates externalities, because the lower quality of life among the Have Nots may also affect the lives of the Haves. In addition to the level of income inequality, the geographic arrangement of income groups directly determines the magnitude of the externalities of inequality. I use two different methodologies to causally estimate the effects of socioeconomic segregation on different types of urbans public goods and services. First, I use topographical rivers as an instrument for segregation. In addition, I leverage a discontinuity in the design of Brazil’s Minha Casa, Minha Vida social housing program to causal estimate the effects of change to segregation. I show that segregation between the upper and lower class (i.e., household income under 3 minimum wages) causally increases the provision of certain types of public goods, yet also reduces the provision of others. I provide a theory that explains how specific features of a public good (e.g., excludability) explains this discrepancy in the effects of segregation.

Author

• Alice Z Xu, Harvard University