Edoardo Frattola (Bank of Italy)
Niccolò Cattadori and Elena Lazzaro
We estimate the causal effect of university department excellence funding on several outcomes, including faculty hiring, educational offerings, student attraction, and scientific productivity. For the first time, we link administrative data on the careers of all Italian academics to their publications, department educational activities, and student enrollment. Using a dynamic difference-in-differences design, we find that excellence funding significantly increased faculty size (a 6.4% rise in funded departments), but had no impact on educational offerings in terms of new degree or PhD programs. The funding led to a 13.3% increase in student enrollment after three years, suggesting that the excellence designation likely acted as a quality signal, making the departments more attractive to students, particularly high-achieving ones. The funding also boosted scientific output, with a 10.1% rise in publications. While a larger faculty size contributed to this increase, large STEM and Life Sciences departments also saw a rise in individual productivity, likely due to agglomeration effects and improved research infrastructure. No such effect is found in Social Sciences and Humanities departments.