American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Public Financing and Racial Disparities: Does a Rising Tide Always Lift All Boats?
American Economic Journal: Economic Policy
(pp. 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.Citation
Qiu, Tian. 2025. "Public Financing and Racial Disparities: Does a Rising Tide Always Lift All Boats?" American Economic Journal: Economic Policy 17 (4): 331–53. DOI: 10.1257/pol.20220480Additional Materials
JEL Classification
- H74 State and Local Borrowing
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I22 Educational Finance; Financial Aid
- I26 Returns to Education
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J22 Time Allocation and Labor Supply
- J31 Wage Level and Structure; Wage Differentials