DEMOGRAPHIC CHARACTERISTICS AND THE PUBLIC BUNDLE

This paper explores the relationship between the demographic character istics of a community and the quantities of goods and services provide d by its government, what we label the ''public bundle.'' We consider three models of public spending. The first is a traditional ''selfish' ' public choice model in which individuals care only about themselves and not about others. The second is a ''community preference'' model i n which an individual's preferred spending depends on the characterist ics of his or her community, either in a discriminatory fashion, where an individual's concern for other people depends on their similarity to that individual, or in an even-handed way, where an individual's co ncern for others depends on those people's needs but not their identit ies. The third model presents a sorting process through which individu als choose communities according to their tastes for public spending. To evaluate these models of spending, we examine how county and state spending in the United States is affected by the age and racial compos ition, and the total size of a jurisdiction. We find that the estimate d effects of demographic characteristics in the state equations are st rikingly different from the estimated effects in the county equations. One possible explanation for these differences is that a jurisdiction 's spending is affected differently by its own demographic characteris tics and by the characteristics of the surrounding area. We conclude t hat community preference is important in explaining local spending, bu t that its determination is more complex than simple theory suggests.