Do federal grants boost school spending? Evidence from Title I

One of the federal government's main elementary and secondary education programs is Title 1, which allocates money for compensatory education to school districts based on child poverty. I use sharp changes in per-pupil grant amounts surrounding the release of decennial census data to identify effects of Title I on state and local education revenue, and how much the program ultimately increases spending by recipient school districts. I find that state and local revenue efforts initially are unaffected by Title I changes, but that local governments substantially and significantly crowd out changes in Title I within in a 3-year period. (C) 2003 Elsevier B.V. All rights reserved.