In Italy, scholarships for first-year university students are assigned on the basis of the family's economic situation. However, not all the eligible students benefit of it due to the limited amount of funds available. By comparing the choices of beneficiaries and eligible non-beneficiaries, this work estimates the effects of alternative rules for awarding grants on dropout rates. The data uses administrative data from all Italian universities.
An indiscriminate allocation of scholarships to all eligible students would have modest effects on dropout rates, doubling the spending. For a given level of resources, an attribution based on merit would reduce the share of beneficiaries who leave the studies. A greater reduction in the dropout rate would be obtained by awarding the scholarship on the basis of the characteristics that affect the probability of drop out.
