Education providers’ take-up of government grants

In decentralized school systems where core funding comes from local governments, education providers can sometimes be entitled to central government grants on top of the core funding (e.g. Title I in the US). In Sweden, government grants that public and private education providers can claim have grown over time; from around 3 % of compulsory school costs in 2010 to 7 % in 2023. The grants, which typically are tied to specific purposes, are a way for the government to exercise control over various school policies in a decentralized system. However, for the grants to have an impact, the providers must claim their entitlements which requires submitting a detailed plan for fund usage and not all providers do this, especially not smaller private providers. We study how the size of the grant entitlement affects providers’ take-up decisions. This is a margin that readily can be adjusted by e.g. merging smaller grants to a single larger. We exploit variation from a large grant in Sweden that allocated substantially more money to providers with a socioeconomic student composition below a certain threshold value. Using a regression discontinuity design, we find that take-up among private providers increased from 70 % to 88 % as the grant amount increased from about 4 % to 13 % of the total cost per student. Importantly, the effect on take-up appears to be sticky as it remains in a later year when the compensatory part was removed from the grant and all providers were entitled to the same amount per student.