Income Inequality, the Median Voter, and Support for Public Education

As income inequality has grown in local school districts, so too have the local dollars flowing into elementary and secondary education.

According to the U.S. Census Bureau, inequality in household income rose more than 20 percent from 1969 to 2006, driven largely by income growth in the top half of the distribution. This development, along with the growing diversity of the U.S. population along racial and ethnic lines, raises the question of whether public support for the provision of basic public services, and for a social safety net, has changed or will change in the future.

In Income Inequality, the Median Voter, and the Support for Public Education (NBER Working Paper No. 16097), authors Sean Corcoran and William Evans focus on the impact of growing income inequality on local support for public schools. Using panel data for over 10,000 school districts during 1970-2000, they explore the relationship between rising income inequality at the local level and fiscal support for public elementary and secondary education.

One possible effect of income inequality on public spending is a tension of "the ends against the middle," where both high and low income households choose lower spending on education. Very high income families may favor private-over-public schooling, and low income groups may choose lower taxes and higher consumption over investments in public education. However, the authors conclude instead that the "median voter model" offers a more accurate description of the experience in public education. In this case, the decisive median voter (a household in the middle of the income distribution) benefits from growth in income at the top of the distribution. This decline in the cost of raising public funds results in demand for greater spending on government services.

Indeed, Corcoran and Evans find that as income inequality has grown in local school districts, so too have the local dollars flowing into elementary and secondary education. Their results indicate that 12 percent of the growth in local per-student revenues over the past 30 years can be explained by a decline in the cost of raising public funds for the median voter, a consequence of rising income inequality concentrated in top of the distribution. The authors' results suggest that one consequence of rising social inequality may be a growing capacity of local governments to raise funds from those with growing incomes in the upper tiers of the income distribution.

-- Lester Picker