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State Aid and Student Performance: A Supply-Demand Analysis

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Author Info

  • Henry Kinnucan
  • Yuqing Zheng
  • Gerald Brehmer

Abstract

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.

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File URL: http://www.tandfonline.com/10.1080/09645290600854177
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Education Economics.

Volume (Year): 14 (2006)
Issue (Month): 4 ()
Pages: 487-509

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Handle: RePEc:taf:edecon:v:14:y:2006:i:4:p:487-509

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Related research

Keywords: Human capital; state aid; student performance; teacher pay;

References

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  1. Hanushek, E.A.omson, W., 1996. "Assessing the Effects of School Resources on Student Performance : An Update," RCER Working Papers 424, University of Rochester - Center for Economic Research (RCER).
  2. Eric A. Hanushek, 2004. "What if there are no 'best practices'?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(2), pages 156-172, 05.
  3. Brasington, D. M., 2003. "The supply of public school quality," Economics of Education Review, Elsevier, vol. 22(4), pages 367-377, August.
  4. Dewey, James & Husted, Thomas A. & Kenny, Lawrence W., 1999. "The ineffectiveness of school inputs: a product of misspecification?," Economics of Education Review, Elsevier, vol. 19(1), pages 27-45, February.
  5. Rosalind Levacic & Anna Vignoles, 2002. "Researching the Links between School Resources and Student Outcomes in the UK: A Review of Issues and Evidence," Education Economics, Taylor & Francis Journals, vol. 10(3), pages 313-331.
  6. Hanushek, Eric A, 1986. "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1141-77, September.
  7. David Mayston, . "Educational Attainment and Resource Use: Mystery or Econometric Misspecification," Discussion Papers 96/17, Department of Economics, University of York.
  8. George A. Akerlof & Rachel E. Kranton, 2002. "Identity and Schooling: Some Lessons for the Economics of Education," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1167-1201, December.
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Cited by:
  1. Henry W. KINNUCAN & Martin D. SMITH & Yuqing ZHENG & Jose R. LLANES, 2012. "The Effects of No Child Left Behind on Student Performance in Alabama’s Rural Schools," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 12(1), pages 5-24.

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