DP11274 The Cost of Decentralization: Linguistic Polarization and the Provision of Education

Author(s): Francesco Cinnirella, Ruth M. Schueler
Publication Date: May 2016
Keyword(s): Centralization, Decentralization, education, Polarization, Prussia, Public Goods
JEL(s): H41, H75, I22, N13, N33
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11274

In this paper we argue that different preferences in a decentralized system lead to under provision of public goods. We analyze the provision of public primary education in nineteenth-century Prussia which was characterized by a linguistically polarized society and a decentralized education system. Using unique county-level data on education spending we show that linguistic polarization has a negative impact on local spending. Instrumental variable estimates using distance to the eastern border suggest that the relationship can be causally interpreted. Exploiting a reform of education spending, we show that centralization increases the provision of primary education relatively more in linguistically polarized counties.