Nepotism vs. Specific Skills: The effect of professional liberalization on returns to parental background of Italian lawyers

We study mechanisms of intergenerational inequality amongst Italian lawyers over 1994–2014 using a longitudinal dataset that combines administrative and survey data. First, we estimate a 10.6% earnings premium for a law family background within the group of lawyers, conditional on entering the profession. Then, we exploit the 2003–2006 liberalization process, which asymmetrically affected the two main transmission mechanisms: skill transfer and nepotism. We find that this liberalization squeezed the law family background return by between one-half and two-thirds, thus revealing a high incidence of nepotism. The bulk of the reduction occurred at the top of the earnings distribution, suggesting the breaking of a glass ceiling.