Minding Your Neighborhood: The Spatial Context of Local Redistribution*

Objectives. Previous research on redistribution by local governments has not accounted for spatial context. I develop a model of local own‐source redistributive spending that accounts for the economic characteristics and policy decisions of geographic neighbors. Methods. I estimate a modified spatial 2SLS equation of own‐source redistributive spending that accounts for endogeneity between neighboring policy decisions and own policy decisions. The data set spans the 48 contiguous states and utilizes data from the 2000 Census and the 1997 Census of Governments, among other sources. Results. I find that the policy choices and economic characteristics of jurisdictional neighbors are significantly related to own‐source housing and community development spending decisions. Jurisdictions reduce their redistributive policies to prevent unwanted movers from entering and produce redistributive packages similar to surrounding jurisdictions. Conclusions. The nuances of geographic context are a critical determinant of local redistributive spending decisions.