Racial Stratification and Local Education Funding

Models of racial effects on education taxation often assume that different races affect taxation symmetrically, and do not distinguish between the distributions of students and adults. Stratification economics suggests that voters are less willing to fund education when students are of racial groups stigmatized by a dominant group of adult voters. If so, the effects of student racial and ethnic diversity on local revenue effort will differ from the effects of adult diversity, and will be different for different racial and ethnic groups, since adults may stigmatize where they have the ability to do so, and students may be stigmatized. Using data from United States school districts, I find significant differences in the effects of student and adult racial/ethnic diversity. Increasing percentages of Black and Hispanic students have positive effects on funding in diverse districts, but in predominantly White districts, this effect is present for Hispanic but not Black students. The results support the theory that White voters stigmatize Black, but not Hispanic, students when they are the dominant adult group. The findings are evidence for stratification as part of the explanation for racial disparities in education spending, and for the importance of considering student and adult distributions separately.