The role of merit-based and need-based financial aid: Evidence from Trieste University's grant programs

The aim of this article is to investigate whether the Italian University grants are an effective tool to prevent student drop-out and to favor the degree attainment whitin accademic path, both for merit and need-based financial aids. The survey units are italian student enrolled on a degree course in Chemistry, Physics and Mathematics from 2002/03 until 2007/08 in the University of Trieste. On the one hand, the Erdisu (Local Governmental Agency) offers some grants every year to eligible students from low-income families (scarcely related to the merit). The main objective of this intervention is to give equal opportunity to achieve higher education to motivated students irrespective of their income. On the other hand, Fonda Foundation offers some (only) merit-based grants to award the best students enrolled in Chemistry, Physics and Mathematics degree courses. In order to estimate the causal effect of receiving a grant, we follow the counterfactual analysis and we match treated and control units using Genetic matching and Coarsened Exact Matching. The results suggest that the need-based financial aids have positive impact to prevent drop-out at 2nd year, but non significant effect on graduation time, whereas the merit-based scholarships increase the probability to achieve the degree on time.