This paper examines the relationship between Education spending and diversity by analysing the impact of Ethnic Fractionalisation on Public and Private education expenditure using empirical approaches for panel data. Private education spending is included to observe whether it changes due to diversity as an alternate indicator for changes in citizens' social preferences due to Ethnic Fragmentation. We observe that variables based on macroeconomic stipulations do not coincide between Public and Private education spending. We find that a 1 standard deviation rise in ethnic fractionalisation significantly increases public education spending by 0.241%, whereas the change in private education spending is insignificant, whereas the prior is inconsistent with research evidence. Countries with high inequality are found to be insensitive to changes in diversity, in assessment the converse is true; countries with low inequality tend to have increased public education spending. These findings are subject to omitted variable bias and hence require alterations. Further extensions imply there is no significant change in public education spending, and private education spending increases by 2.114% due to a 1 unit increase in ethnic fractionalisation. These findings are consistent with the literature and hence leave room for further research. The sections below go through the Economic Theory utilised in our empirical research, then the literature is reviewed to survey previous papers and findings regarding our topic. The 3rd and 4th sections discuss the econometric theory and empirical analysis of results respectively.

In the public finance literature it is well understood that a community's spending can be affected by neighboring communities' spending. It is relatively straightforward to see why these spillovers exist. For example, if a school district increases its spending on public education, this could affect the spending level of neighboring school districts. This paper uses spatial analysis to test the hypothesis that a school district's ethnic heterogeneity affects support for public education. Using a Spatial Lag Model and a national panel of U.S. school districts, I find that spatial dependence does exist in the data and that ethnic heterogeneity is negatively related to school district spending.

This article considers the relationship between ethnicity within the elderly population and education spending. Extensive literature analyzes the relationship between demographics and education spending. This article contributes to this literature by examining the dynamics between the elderly population and ethnicity and its impact on education finance. Using a national panel public school district data set, it is found that increased ethnic fragmentation within the elderly population is negatively related to per-pupil spending and to per-pupil local revenues, but this effect depends on whether the state has a court-ordered reform.

We present a model that links heterogeneity of preferences across ethnic groups in a city to the amount and type of public good the city supplies. We test the implications of the model with three related datasets: US cities, US metropolitan areas, and US urban counties. Results show that productive public goods -- education, roads, libraries, sewers and trash pickup -- in US cities (metro areas/urban counties) are inversely related to the city's (metro area's/county's) ethnic fragmentation, even after controlling for other socioeconomic and demographic determinants. Ethnic fragmentation is negatively related to the share of local spending on welfare. The results are mainly driven by observations in which majority whites are reacting to varying sizes of minority groups. We conclude that ethnic conflict is an important determinant of local public finances.