How do differences among people affect government formation?
According to Charles Gascon, a St. Louis Fed regional economist, racial differences play a greater role than income differences when it comes to the number of municipal governments formed in a metropolitan statistical area.
A recent Dialogue with the Fed event—Does the Number Matter? On Governments and Regional Economic Growth—Gascon noted academic research about the formation of political jurisdictions, such as school districts.
“Differences among people is where we get some big drivers,” he said.
Gascon shared some key findings from a 2004 research paper by economists Alberto Alesina, Reza Baqir and Caroline Hoxby, titled “Political Jurisdictions in Heterogeneous Communities.”
“What they find is that differences in income matter. We will kind of expect that from an economic standpoint,” he explained, noting how income differences might stratify communities and influence people’s choices about where to live.
“But what they also find is that racial differences matter, controlling for income,” Gascon said, “and that racial differences are actually more significant and play a greater role than income differences in the number of governments that are formed.”