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Around the world, areas with ethnic divisions are likely to have less government spending.
The extreme homogeneity of the Scandinavian countries, for example, made it easier to create support for a generous welfare state. Before the system was reformed, the U.S. states with larger black populations typically had less generous welfare benefits, holding state income constant. The work of the economist Erzo Luttmer finds that Americans are less likely to support redistribution if they live near poorer people of a different race.
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