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KIDS OR CASH? EXPLORING CHARTER SCHOOL RESPONSES TO DECLINING GOVERNMENT REVENUES
Author(s) -
Grosskopf Shawna,
Hayes Kathy,
Razzolini Laura,
Taylor Lori
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12853
Subject(s) - charter , revenue , government (linguistics) , crowding out , economics , cash , public economics , business , demographic economics , finance , monetary economics , political science , law , linguistics , philosophy
While the literature is extensive on school districts' revenue sources, less research has been done on the impact of donations on school district funds. In this paper, we extend the theoretical literature on crowding out of private donations by government grants for one type of nonprofit firm, namely charter schools. The theoretical model leads us to focus on the key relationships among fundraising effort, enrollment (which is tied to federal and state funding) and donations. Using a dataset on Texas charter schools we adopt a two‐stage approach to examine the empirical relationship between changes in nondonor revenues and the donations received by charter schools. Like the extensive empirical estimates of the effects of government grants on donations for other types of nonprofit firms, we find evidence of crowding‐out with respect to our sample of charter schools. We also find a significant, positive effect of fundraising on donations with a $1 increase in fundraising associated to a $0.58 increase in donations, a pattern consistent with overinvestment in fundraising. Enrollments exhibit a robust inverse relationship to changes in nondonor revenues. ( JEL H00, H32, H50)