Talking about the Pigou paradox

Purpose - The purpose of this paper is to point to the inefficiency of the Italian educational system as a key factor of persistent differences between the distribution of incomes (skewed) and that of talents (normal), stated in the Pigou paradox. In fact, against the intention assigned to it by the Italian constitution, the educational system is designed in such a way to reinforce, rather than weaken, the current unequal distribution of incomes. Design/methodology/approach - The authors study the socio‐educational background of AlmaLaurea graduates by way of correlation and regression analysis. The AlmaLaurea databank is the most important source of statistical information of its type in the country. The authors, consider several indicators of performance, such as the probability of getting a degree, the final grade achieved and the length of studies. Findings - Parents’ educational level appears to be the main determinant of the grade achieved at secondary high school and at the university. The effect of family background on children's success at the university is not direct, but through the high school track. In fact, although any secondary high school gives access to the university, nonetheless lyceums provide students with far higher quality of education than technical and professional schools. Parental background affects also the length of studies, which suggests that the indirect cost of tertiary education is much higher for those with a poorer educational background and limited means. Practical implications - Increasing the average educational level was one of the promises of the “3+2” university reform implemented in 2001. This objective has been achieved only in part, due to the continuing high indirect cost of tertiary education, which particularly affects individuals with limited means. More coordination in the interpretation and implementation of the aims of the reform would have prevented the main actors of the reform from failing it. School tracking should be reformed so as to allow more consideration for low school grades in the choice of parents and provide more on‐the‐job training to students in the professional/technical schools. Originality/value - The paper proposes an interpretation of the Pigou paradox in Italy, based on the inefficiency of the university system, due to the peculiar school tracking and the ensuing high indirect cost of education. On this, the paper provides new circumstantial evidence based on the AlmaLaurea database almost ten years after the “3+2” reform.