A state school system should be expected to reduce income inequality and to make intergenerational mobility easier. In Discussion Paper No. 1496, Aldo Rustichini, Andrea Ichino and Daniele Checchi observe, however, that Italy displays less inequality between occupational incomes, but lower intergenerational upward mobility in comparison to the US. They provide evidence on this empirical puzzle, and offer a theoretical explanation.

The paper suggests that from a policy viewpoint, neither of the two systems is necessarily superior in terms of stimulating greater intergenerational mobility. A centralized system fosters more upward mobility when it is applied to those types of schooling in which the education quality offered by the institution is relatively more important than the individual effort or talent of the student. Conversely, when an outstanding education quality is wasted in the absence of individual effort and talent, the crucial role of incentives is better enhanced by a decentralized education system.

More Equal but Less Mobile? Education Financing and Intergenerational Mobility in Italy and in the US
Aldo Rustichini, Andrea Ichino and Daniele Checchi