Local Responses to Federal Grants: Evidence from the Introduction of Title I in the South

We analyze the effects of the introduction of Title I of the 1965 Elementary and Secondary Education Act, a large federal grants program designed to increase poor students' educational services and achievement. We focus on the South, the poorest region of the country. Title I increased school spending by $0.50 on the dollar in the average southern school district and by more in districts with less ability to offset grants through local tax reductions. Title I-induced increases in school budgets appear to have reduced high school dropout rates of whites, but not blacks. (JEL H52, H75, I21, I28, J15)