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Nepotism, Schooling Outcomes and Economic Development


  • Marcello Perez-Alvarez
  • Holger Strulik


Schooling outcomes matter for economic development. At the same time, educational policies around the globe often fail to effectively improve them. This paper suggests perceived nepotism as an important barrier to the development of cognitive skills as schooling outcomes. We argue that students in countries that perceive labor markets to be nepotistic experience a weaker economic motive to invest in human capital. To formally motivate this relationship, we develop a dynamic general equilibrium model in which nepotism is explained as an evolving cultural norm. We test the central prediction of the model by relating the PISA scores to an indicator for perceived nepotism at the country level. The findings show that, on average, an increase in one standard deviation of the perceived nepotism indicator decreases the PISA reading scores by 0.21 standard deviations, conditioning for overall corruption perception. Several robustness checks corroborate the stability of our estimate. The analysis implies that recruitment practices in labor markets strongly shape individual's efforts to accumulate human capital. Accordingly, the consideration thereof may enhance educational policy efforts.

Suggested Citation

  • Marcello Perez-Alvarez & Holger Strulik, 2018. "Nepotism, Schooling Outcomes and Economic Development," CSAE Working Paper Series 2018-02, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2018-02

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    nepotism; cognitive skills; human capital; economic growth; norm transmission;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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