TY - JOUR
T1 - State aid and student performance
T2 - A supply-demand analysis
AU - Kinnucan, Henry W.
AU - Zheng, Yuqing
AU - Brehmer, Gerald
PY - 2006/12
Y1 - 2006/12
N2 - Using a supply-demand framework, a six-equation model is specified to generate hypotheses about the relationship between state aid and student performance. Theory predicts that an increase in state or federal aid provides an incentive to decrease local funding, but that the disincentive associated with increased state aid is moderated when federal aid is compensatory. Applying the theory to Alabama county school test score data, results suggest that between 62 and 73 cents of the incremental state dollar goes to schools; the rest is absorbed by local taxpayers through incidence shifting, and by the federal government through the compensatory mechanism. Despite these 'leakages', results suggest that increased state aid can improve student performance provided the incremental funding goes to teacher salaries and not to reductions in class size. Poverty reduction or income growth, however, might accomplish the same ends at lower cost.
AB - Using a supply-demand framework, a six-equation model is specified to generate hypotheses about the relationship between state aid and student performance. Theory predicts that an increase in state or federal aid provides an incentive to decrease local funding, but that the disincentive associated with increased state aid is moderated when federal aid is compensatory. Applying the theory to Alabama county school test score data, results suggest that between 62 and 73 cents of the incremental state dollar goes to schools; the rest is absorbed by local taxpayers through incidence shifting, and by the federal government through the compensatory mechanism. Despite these 'leakages', results suggest that increased state aid can improve student performance provided the incremental funding goes to teacher salaries and not to reductions in class size. Poverty reduction or income growth, however, might accomplish the same ends at lower cost.
KW - Human capital
KW - State aid
KW - Student performance
KW - Teacher pay
UR - http://www.scopus.com/inward/record.url?scp=33749003455&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33749003455&partnerID=8YFLogxK
U2 - 10.1080/09645290600854177
DO - 10.1080/09645290600854177
M3 - Article
AN - SCOPUS:33749003455
SN - 0964-5292
VL - 14
SP - 487
EP - 509
JO - Education Economics
JF - Education Economics
IS - 4
ER -