Economic theory suggests that intergovernmental grants are equivalent to private income. A large empirical literature, however, contradicts this prediction. A school finance reform in New Hampshire, where local public goods decisions are made by a form of direct democracy, provides an unusually...

A strong positive monotonic relationship between wage inequality and city size developed between 1979 and 2007 in the United States. After accounting for differences in skill composition across cities of different sizes, we find that at least 23% of the nationwide increase in the variance of log...