In 1993, the creation of Georgia's HOPE Scholarship Program accelerated interest in understanding the effects of merit-based student financial aid. This article compares a sample of "borderline" HOPE recipients (students just above the eligibility threshold) with similar nonrecipients to examine differences on four college performance outcomes. The HOPE Scholarship recipients accumulated more credit hours, achieved slightly higher grade point averages, and were more likely to have graduated after 4 years of college. In addition, HOPE recipients who attended 4-year institutions of higher education were more likely to persist in college. Most merit aid recipients lost their scholarships, however, which slightly reduced recipients'advantages on grade point average and credit hour accumulation. Differences in persistence and graduation are significant only for those who maintain eligibility for the scholarship, suggesting that scholarship retention is critical if merit aid programs are to help achieve several of the broad goals of higher education.

This paper examines the incidence of the implicit lottery tax and the distribution of benefits from lottery-funded programs in Georgia. Georgia's lottery is unique in that revenues are earmarked for three educational programs-HOPE College Scholarships, universal pre-kindergarten, and education infrastructure. We estimate separate models of household-level lottery purchases and of household benefits from lottery-funded programs. Our estimates suggest that lower income and non-white households tend to have higher purchases of lottery products while receiving lower benefits, as compared to higher income and white households. Benefits of HOPE Scholarships, in particular, accrue disproportionately to higher income and more educated households.

In contrast to education reform efforts that target teachers and schools, merit-based financial aid for college increases the incentives for high school students and their families to directly affect the quality of education by investing more time and effort in schoolwork. Large-scale merit-based aid programs, such as Georgia's HOPE Scholarship, seek to improve education by encouraging students to meet higher standards, in this case by obtaining a 3.0 grade point average in high school and college. Since the HOPE program began in 1993, the number of high school graduates qualifying for the aid has steadily increased to more than 38,000 graduates in the class of 1998, or 59.5 percent of the graduating class. At the same time, the relationship between grades and achievement has remained consistent or, in some cases, improved since HOPE began. In fact, African-American males and females with a 3.1 high school core course grade point average have increased their average Scholastic Assessment Test (SAT) scores by more than 20 points. This indicates that merit-based aid has improved the quality of K-12 education in Georgia and reduced racial performance disparities by motivating students and their families to commit greater effort to schooling. © 2002 by the Association for Public Policy Analysis and Management.

This study tests the effects of a growing form of indirect state aidFstatesupported property tax exemptionsFon local government efficiency. We hypothesize that larger exemptions, by lowering the effective tax price paid by local homeowners and thus their incentive to monitor efficiency, will reduce local government efficiency. We test this hypothesis by examining the introduction of New York State's large state-subsidized property tax exemption program, which began in 1999. We find evidence that, all else constant, the exemptions have reduced efficiency in districts with larger exemptions, but the effects appear to diminish as taxpayers become accustomed to the exemptions.

Although rearranging school organizational features is a popular school reform, little research exists to inform policymakers about how grade spans affect achievement. This article examines how grade spans and the school transitions that students make between fourth and eighth grade shape student performance in eighth grade. The authors estimate the impact of grade span paths on eighth-grade performance, controlling for school and student characteristics and correcting for attrition bias and quality of original school. They find that students moving from K-4 to 5-8 schools or in K-8 schools outperform students on other paths. Results suggest four possible explanations for the findings-the number and timing of school changes, the size of within-school cohorts, and the stability of peer cohorts.