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.