Is it better to have more (ethnically) diverse local government, or less diverse local government? There are valid theoretical arguments in both directions. If local government leaders (e.g. elected council members) are more diverse, then they will have a diversity of opinions and preferences, possibly leading to more disagreements and less consensus decision-making, and government may become 'gridlocked', unable to make key decisions. On the other hand, local government leaders do feel electoral pressure, including the pressure to conform, and to the extent that there is effective electoral pressure, gridlock would not be a problem.
Whether more diverse local governments spend less on public goods (or not) is the subject of this 2017 article by Brian Beach (College of William & Mary) and Daniel Jones (University of South Carolina), published in the American Economic Journal: Economic Policy (ungated version here). They use data from the:
...California Election Data Archive (CEDA), which provides the names and number of votes for every candidate in every local government election occurring between 1995 and 2011.
For the 5177 candidates who won elections (or were close but lost) over the period from 2005 to 2011, they collect data on ethnicity, either directly from city councils, or by asking workers on Amazon Mechanical Turk (mTurk) to classify the candidates' ethnicities. They got 10 mTurk workers to classify each candidate, and had 94 percent agreement overall (they drop the 31 candidates who had low agreement from their sample). This was similar to the level of agreement between mTurk workers and city council data (95 percent).
Beach and Jones then measure the ethnic diversity of each city council, using indices of fractionalisation and polarisation. As they explain:
Both indices range from zero to one, where zero corresponds to a situation where there is no diversity. Fractionalization is maximized when each council member is of a different ethnicity. Polarization, on the other hand, is maximized when the seats are distributed into two ethnic groups.
The outcome variable that Beach and Jones are most interested in is public goods expenditure, which they calculate:
...by taking a city’s total expenditures for the year and removing expenditures on “government administration” and debt repayment. The “public goods” category therefore includes all spending on roads, parks, police protection, sewerage, public transportation, etc.
Now, a simple regression approach would be to look at the relationship between diversity (fractionalisation and polarisation) and public goods spending. The problem with that approach is the potential for endogeneity - maybe there are city-level factors that affect both the diversity of local government and local public goods spending. For example, perhaps having a more diverse population requires a greater variety of public goods, and more public goods spending, but also tends to lead to a more diverse city council. In that case, the relationship between diversity of the council and public goods spending is biased because of the relationship of both variables to the diversity of the population overall. Beach and Jones deal with that problem by looking at what happens subsequent to close elections, where one of the candidates is the majority ethnicity, and one is a minority. In sufficiently close elections, it is close to random which candidate is ultimately elected, provided some random variation in the diversity of the council, that doesn't depend on any other variable.
Beach and Jones identify 684 close elections with candidates of different ethnicities over the period from 2006 to 2009. Using that data, they find that:
Regardless of whether we measure diversity with fractionalization... or polarization... there is a strong and positive relationship between the election of a non-modal candidate and the diversity of the city council.
No surprises there. Electing a minority candidate increases the diversity of the council. Moving onto the effect on public goods, they find that:
...per capita spending on public goods falls by approximately 13 percent (significant at the 1 percent level) following the election of a non-modal candidate. The effect on nonpublic goods spending remains positive (roughly 14 percent) but is not significant at conventional levels.
So, more diverse local governments spend less on public goods. Beach and Jones then drill down into potential mechanisms that explain their results, and the consequences, and show that:
Our results indicate that diversity leads to gridlock. Cities reduce the amount they spend on public goods as their city council becomes increasingly diverse. These effects are largest for segregated cities and cities with more income inequality (where the potential for disagreement may be largest). We also find that all members of a council that experienced an exogenous shock to diversity receive fewer votes when they run for reelection. This latter point suggests that the city’s population is dissatisfied with the decline in public goods, ruling out the possibility that diverse councils simply achieve greater efficiency in public good provision.
So, ethnic diversity of local government appears to encourage gridlock, reducing local public goods spending, and it isn't an outcome that citizens favour. However, one thing that Beach and Jones didn't consider, is whether (or to what extent) a match between the majority ethnicity of local government and the majority ethnicity of the population matters. Or whether the effect is different at different levels of ethnic representativeness. Those would be interesting follow-up questions.
Also, the negative implications of this research need to be juxtaposed with the problem of groupthink. Groupthink occurs when there is too much consensus, leading to decision-making that lacks critical evaluation. This is more likely when the group of decision-makers is less diverse. So, perhaps the quantity of public goods spending is higher when there is less diversity in local government, but perhaps the quality of that spending is lower?
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