THE IMPACT OF ETHNIC HETEROGENEITY ON EDUCATION SPENDING: A SPATIAL ECONOMETRIC ANALYSIS OF UNITED STATES SCHOOL DISTRICTS

In the public finance literature it is well understood that a community's spending can be affected by neighboring communities’ spending. It is relatively straightforward to see why these spillovers exist. For example, if a school district increases its spending on public education, this could affect the spending level of neighboring school districts. This paper uses spatial analysis to test the hypothesis that a school district's ethnic heterogeneity affects support for public education. Using a Spatial Lag Model and a national panel of U.S. school districts, I find that spatial dependence does exist in the data and that ethnic heterogeneity is negatively related to school district spending.