Ethnoracial Homogeneity and Public Outcomes: The (Non)effects of Diversity

How does ethnoracial demography relate to public goods provision? Many studies find support for the hypothesis that diversity is related to inefficient outcomes by comparing diverse and homogeneous communities. We distinguish between homogeneity of dominant and disadvantaged groups and argue that it is often impossible to identify the effects of diversity due to its collinearity with the share of disadvantaged groups. To disentangle the effects of these variables, we study new data from Brazilian municipalities. While it is possible to interpret the prima facie negative correlation between diversity and public goods as supportive of the prominent "deficit" hypothesis, a closer analysis reveals that, in fact, more homogeneous Afro-descendant communities have lower provision. While we cannot rule out that diversity is consequential in other contexts, our results cast doubt on the reliability of previous findings related to the benefits of local ethnoracial homogeneity for public outcomes.