Measuring Horizontal Fiscal Imbalances: The Case of Italian Municipalities

SERIES Working Paper N.49

33 Pages Posted: 11 Sep 2014

See all articles by Giuseppe Di Liddo

Giuseppe Di Liddo

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods

Ernesto Longobardi

Università degli Studi di Bari “Aldo Moro” (UNIBA)

Francesco Porcelli

University of Warwick

Date Written: July 28, 2014

Abstract

In the literature on fiscal federalism, vertical fiscal imbalances have been widely studied, while the theme of horizontal fiscal imbalances and inequality between local governments’ fiscal capacities is still less explored. This paper contributes to fill the gap. A new method to compute fiscal capacities based on regression analysis is proposed, which can overcome some of the drawbacks of traditional methods such the representative tax system. This new approach is then employed to evaluate the fiscal capacities of Italian municipalities over the period 2002-2010. Finally two global measures of the horizontal fiscal imbalance are then used to evaluate the equity implication of a major policy change occurred in 2008 in Italian municipal finance.

Keywords: Inter-governmental grants, horizontal and fiscal imbalances, equalisation, fiscal capacity

JEL Classification: H73, H77

Suggested Citation

Di Liddo, Giuseppe and Longobardi, Ernesto and Porcelli, Francesco, Measuring Horizontal Fiscal Imbalances: The Case of Italian Municipalities (July 28, 2014). SERIES Working Paper N.49, Available at SSRN: https://ssrn.com/abstract=2494218 or http://dx.doi.org/10.2139/ssrn.2494218

Giuseppe Di Liddo (Contact Author)

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Economics and Mathematical Methods ( email )

Largo Abbey St. Scholastica
Bari, 70124
Italy

Ernesto Longobardi

Università degli Studi di Bari “Aldo Moro” (UNIBA) ( email )

Piazza Umberto I
Bari, 70121
Italy
+390805049103 (Phone)

Francesco Porcelli

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

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