Local Administration Funding and Regional Disparities in Italy Before WW1
Quaderni DSE Working Paper No. 757
29 Pages Posted: 2 Jun 2011
Date Written: May 13, 2011
Numerous studies have been made of regional differences in income and level of development in Italy, and these studies basically differ in the responses they give to the question of whether the said differences were already of a substantial nature prior to Unification, or whether in fact they have widened since then.
The present essay is going to examine this problem by focusing on the local administrative system adopted after Italian Unification, in order to ascertain the existence of a different approach to public intervention at the local level, and thus to the existence of disparities in local public spending. The paper offers an analysis of the actual working of the post-Unification administrative system in Italy, in terms both of the powers attributed to Italy’s municipalities and provinces, and of the degree of autonomy they had in deciding on funding methods. This analysis aims to ascertain whether the chosen strategy could have been maintained in a state characterized by strong regional differences, and to establish the kind of impact such a strategy had on the regional differences themselves.
The main conclusion is that in absence of any sort of automatic transfer from the more industrialized regions to the poor ones, the adoption of a decentralized tax system for the financing of local public expenditure contributed to the deepening of regional divide. As a consequence at the beginning of the 19th century the central government started to subsidize the poorest regions and little by little move towards a more centralized fiscal system.
Keywords: Italy, economic history, regional divide, local administration, tax system
JEL Classification: N43
Suggested Citation: Suggested Citation