Cronyism and Education: Evidence from Italy

This paper investigates the relationship between cronyism and educational attainments. Through a stylised theoretical model, we show that cronyism reduces incentives for workers to acquire education, by lowering its expected value. However, high level of cronyism can foster competition among influential individuals to achieve high-job positions, thus increasing educational attainments. An empirical analysis on Italian universities confirms our theoretical insights. Using a fractional logit model, we find a U-shaped relationship between cronyism and education, proxied by the completion time of bachelor students.