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 50 cents 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 Iinduced increases in school budgets appear to have reduced high school dropout rates of whites, but not blacks.