Does Higher Social Diversity Affect People's Contributions to Local Schools? Evidence from New Zealand

Abstract

New Zealand is becoming more socially diverse, in common with other Western countries. Primarily U.S. based-evidence suggests that growing diversity may lower people’s participation in society, and their contributions towards public goods. We test whether there is evidence of a similar relationship in New Zealand, specifically between social diversity and voluntary contributions towards local schools. We use data from the New Zealand Ministry of Education and the Census for the years 2001 and 2006 to estimate whether social heterogeneity affects a school’s ability to raise funds locally. Individual school revenue data is matched with measures of the heterogeneity of the neighbourhood in which the school is located. We consider heterogeneity by language, ethnicity, religion and income. After running cross-section and fixed effects regressions which control for other factors, we find only limited evidence that diversity affects the financial support schools receive from their local communities. We do find that higher nominal household income inequality lowers the revenues schools collect from fundraising, but not the revenues they receive from parental contributions or donations.