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The Impact of Intergovernmental Incentives on Student Disability Rates


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  • Sally Kwak

    (University of Hawaii, Department of Economics, Honolulu, HI, USA,


Measured disability rates among school-age children and the associated spending on special education programs have risen steeply over the past thirty years. Currently, about 15 percent of U.S. school children are classified as "disabled." Many observers note that the special education funding programs established by state and federal governments create an incentive for local school districts to drive up disability rates, potentially accounting for some of the rise in measured disability rates. I use the experiences following a major reform of the special education funding system in California to examine this issue. Between 1996 and 1998, the state converted from a system that awarded funds based on the number of students classified as disabled in a district (with funding rates that varied across districts) to one based on total enrollment. This reform induced changes in the total funding awarded to different districts and also reduced the marginal revenue from classifying an additional student as disabled to zero. Consistent with standard models, I find that the California reform creates both "income" and "substitution" effects on the number of students classified as disabled.

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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 38 (2010)
Issue (Month): 1 (January)
Pages: 41-73

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Handle: RePEc:sae:pubfin:v:38:y:2010:i:1:p:41-73

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Keywords: special education; fiscal incentives; disability rates; education finance reform;


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Cited by:
  1. Dhuey, Elizabeth & Lipscomb, Stephen, 2010. "Disabled or Young? Relative Age and Special Education Diagnoses in Schools," CLSSRN working papers clsrn_admin-2010-7, Vancouver School of Economics, revised 27 Feb 2010.
  2. Deuchert, Eva & Kauer, Lukas & Liebert, Helge & Wuppermann, Carl, 2013. "No disabled student left behind? - Evidence from a social field experiment," Economics Working Paper Series 1336, University of St. Gallen, School of Economics and Political Science.


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