I personally feel that budget of the country creates inequality among the society. The budget that is given to the Urban Local Bodies is mostly used for the infrastructure for the higher income groups. For example, if there is water shortage, then poorer areas will face less water supply first. Similarly if we see that government open schools which are used predominantly by poor kids, then we missed the part that higher income group's children go to private/ public schools, which provide better quality of education.
So please suggest methodology to prove the hypothesis, and any good reading regarding the topic.
Dear Nigam, ideed, Prof Cesar Victora has some studies on this, based on Rodgers diffusion of innovation theory. He calls it the "Inverse Equity Hypothesis" (Victora, 2000, Lancet) and is inspired in the "Inverse Care Law" (Hart, 1971, Lancet).
In one of my papers I created a public policy score based on welfare policies in Brazilian municipalities and total expenditures in health (per capita) was one of the components (pipe water, nursing schools, etc, were other items). Municipalities with better welfare policies had better health, however, there was an interaction between income and public policy. The richer (not the rich, as we included middle class in this group) improved their health much more than the poorer. Hope this can help.
Article How much of the income inequality effect can be explained by...
Here in the United States, local governments, for all practical purposes, are self-funded using three basic revenue sources- income tax, ad valorem tax, and sales tax, and each have significant issues that tend to acerbate the wealth gap. With respect to income tax, wealthy people pay more than poor people because they have higher incomes; thus, wealthier municipalities receive more. Ad valorem tax has a similar phenomenon, as wealthier people have more expensive property which generates more tax revenue. Sales taxes are not only regressive in nature but when food and other necessities are exempted, the poorer locales do not generate many sales taxes, as those who are poor tend to spent their incomes on essentials like food that are not tax and have little left for luxury items that are taxed.
In Southeastern Michigan, the core city of Detroit is where the poor live, while the wealthy people live in the suburban municipalities and townships, creating a sizable wealth disparity between the various local governments. Here in the United States, much of the wealth disparity among locales is a result of poor public policy by the local governments driving the affluent into other jurisdictions. An interesting study would be to compare the segregation and ghettoization of the American metropolitan areas with the policies (or lack of) of the local leadership, and you will find a very definite link between the two.