The Effect of Ethnic and Racial Diversity on School Funding across the Urban-Rural Divide

This paper examines the impact of ethnic and racial diversity on the public’s willingness to invest in public goods. Challenging the prevalent assertion that increasing diversity reduces support for investing in public goods, it argues that this relationship is substantially shaped by the context in which people live because demographic changes are highly localized. Comparing random and fixed effects models of school bond elections in Texas, the paper finds that increasing ethnic and racial diversity at the local level has mixed effects on school bond passage. While school bonds pass at higher rates in more diverse counties, increasing diversity within a county reduces bond rate passage. This effect is shaped by the type of place in that increasing diversity more negatively impacts the passage of school bonds in rural compared to urban counties. These results suggest that the effect of diversity varies across place warranting a localized approach to examining its relationship to public preferences for school funding.