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CESifo Economic Studies 2008 54(2):149-176; doi:10.1093/cesifo/ifn011
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© The Author 2008. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Differential Grading Standards and University Funding: Evidence from Italy

Manuel Bagues*, Mauro Sylos Labini{dagger} and Natalia Zinovyeva{ddagger}

* Universidad Carlos III, e-mail: mfbagues{at}emp.uc3m.es
{dagger} IMT Lucca Institute for Advanced Studies, e-mail: m.syloslabini{at}imtlucca.it
{ddagger} BETA at University of Strasbourg and FEDEA, e-mail: nzinovyeva{at}fedea.es

This article documents that grades vary significantly across Italian public universities and degrees. We provide evidence suggesting that these differences reflect the heterogeneity of grading standards. A straightforward implication of this result is that university funding schemes based on students' academic performance do not necessary favour universities that generate higher value added. We test this for the case of the Italian funds allocation system, which rewards universities according to the number of exams passed by their students. We find that university departments that rank higher according to this indicator actually tend to be significantly worse in terms of their graduates' performance in the labour market. (JEL codes: I2, J31, J64)

Key Words: Higher education • grading standards.


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