This paper examines allocation of local public goods over jurisdictions with individuals with identical tastes and different incomes in a model with democratic institutions and majority rule. The median voter (in income) in each jurisdiction determines the probability of re-election for the incumbent government. The jurisdiction with the median of these median voters is most favored. With identical median voters in jurisdictions, and with re-election requiring less than 50% of the mandate, jurisdictions with higher income inequality get favored. Results from a survey data on infrastructure provision in over 1600 Indian villages confirm these hypotheses.
Gupta, S.; Jha, R. Local public goods in a democracy: Theory and evidence from rural India. (2006) 43 pp.