Italy: Inching Out of the Global Crisis

Finanzmarktkrise; Internationaler Finanzmarkt; Spillover-Effekt; Antizyklische Finanzpolitik; Wirkungsanalyse; Italien

Performance Rating and Yardstick Competition in Social Service Provision

This paper investigates whether national evaluation of decentralised government performance tends, by lessening local information spill-overs, to reduce the scope for local performance comparisons and consequently to lower the extent of spatial auto-correlation among local government expenditures. It analyses UK local government expenditures on personal social services before and after the introduction of a national performance assessment system (SSPR, Social Services Performance Rating) that would attribute a rating to each local authority. The empirical evidence suggests that the introduction of the SSPR has substantially reduced policy mimicking among neighboring jurisdictions.social services, welfare competition, information spill-overs, spatial auto-correlation

On the Welfare Effect of a Wage Subsidy on Youth Labor: Italy’s CFL Program

While a vast literature has analysed the wage and employment effects of active labor market programs (ALMPs), a welfare analysis of such programs is seldom implemented (Kluve and Schmidt, 2002). In an attempt to measure the welfare effect of a wage subsidy on youth labor, this paper performs a rudimentary cost-benefit analysis of Italy’s training and employment enhancing program directed at young workers (CFL, Contratti di Formazione e Lavoro). In particular, the analysis highlights the fact that the welfare effect of a targeted wage subsidy – in the form of a payroll tax rebate for firms employing youth labor – crucially depends on whether the labor market is affected by previous fiscal distortions generated either by the absence of linkage between payroll tax revenues and workers’ benefit, or by the presence of a wage floor. Based on reasonable estimates of youth labor demand and labor supply elasticities, it turns out that, in the absence of linkage between payroll tax revenues and benefits to young workers, the introduction of a 15% wage subsidy can be expected to generate a small employment gain (1 to 3 percentage points), and a net welfare gain – measured by the Marshallian approximation of employers’ and workers’ surplus – of less than €30 million (around 5% of the total cost of the welfare programme, amounting to almost €600 million), that could well be offset when the general equilibrium consequences of the selective wage subsidy are allowed for (substitution of non-eligible workers). On the other hand, in the presence of a wage floor that equals the current wage of young CFL workers, and a status quo youth involuntary unemployment rate of 18%, it is estimated that the 15% wage subsidy can generate a youth employment rise of up to 15 percentage points, and a net welfare gain of over €300 million – almost 50% of the total cost of the welfare programme.payroll tax; wage subsidy; minimum wage; cost-benefit analysis.

Green polities: urban environmental performance and government popularity

Ascertaining whether local election results are driven by incumbents’ performance while in office or mechanically reflect constituencies’ ideological affiliation and macroeconomic conditions is crucial for evaluating the alleged accountability-enhancing property of decentralization. Based on a unique score of urban environmental performance and the results of all elections held in the major Italian cities over a decade, we investigate the role of local (fiscal and environmental) versus national issues in municipal elections. While the empirical evidence points to a strong ideological attachment and a somewhat weaker fiscal conservatism, it reveals that media reported environmental ranking has a considerable impact on the popularity of city governments.Local elections, vote function, environmental performance, property tax

Bulk Mediated Surface Diffusion: Non Markovian Desorption with Finite First Moment

Here we address a fundamental issue in surface physics: the dynamics of adsorbed molecules. We study this problem when the particle's desorption is characterized by a non Markovian process, while the particle's adsorption and its motion in the bulk are governed by a Markovian dynamics. We study the diffusion of particles in a semi-infinite cubic lattice, and focus on the effective diffusion process at the interface $z = 1$. We calculate analytically the conditional probability to find the particle on the $z=1$ plane as well as the surface dispersion as functions of time. The comparison of these results with Monte Carlo simulations show an excellent agreement.Comment: 16 pages, 7 figs. European Physical Journal B (in press

FDI Determination and Corporate Tax Competition in a Volatile World

This paper investigates the role of economic and political volatility in the process of corporate tax-rate determination. The article is based on a theoretical framework that allows for the ability of multinational firms to choose the optimal timing of foreign investment and to shift profits by transfer pricing, and provides an empirical analysis on a large panel data set of countries over the 1983-2003 period. First, a reduced-form dynamic equation of corporate tax rate determination is estimated by the generalised method of moments (GMM), where a country’s top statutory corporate tax rate depends on a number of measures of economic and political volatility. The fundamental testable prediction derived from the theoretical model is that increased volatility should reduce a country’s corporate tax rate. Our results support the hypothesis that economic volatility is associated with lower top statutory corporate tax rates, while our measures of political volatility have no significant impact on corporate taxation policy. In order to identify the channels through which volatility works, we also estimate a structural model allowing for simultaneous determination of the corporate tax rate and the inflow of FDI to a particular country. The estimates of the structural model show that economic volatility affects the corporate tax setting process through their impact on FDI inflow.foreign direct investment, tax competition, volatility

In Search for Yardstick Competition: Property Tax Rates and Electoral Behavior in Italian Cities

Do citizens engage in comparative performance evaluation across local governments? And if they do, how can we disentangle this behavior from other forms of strategic interactions among local governments or simple spatial correlation across neighboring jurisdictions? We use spatial econometrics techniques and the institutional characteristics of the Italian system to test if some theoretically derived predictions of yardstick competition theory are supported by data, estimating to this aim both a tax setting and a popularity equation. The results show that local tax rates are positively auto-correlated among neighboring jurisdictions when the mayors run for re-election, while this correlation is absent where either the mayors face a term limit or where they are backed by an overwhelming majority in the local council. Both results are in clear agreement with yardstick theory. On the other hand, the results of the estimation of the popularity equation are less supportive of the theory, possibly as a result of the difficulty in controlling for public service quality and the simultaneous setting of multiple policy instruments.local property tax setting, yardstick competition, spatial auto-correlation.

Diffusion in Fluctuating Media: The Resonant Activation Problem

We present a one-dimensional model for diffusion in a fluctuating lattice; that is a lattice which can be in two or more states. Transitions between the lattice states are induced by a combination of two processes: one periodic deterministic and the other stochastic. We study the dynamics of a system of particles moving in that medium, and characterize the problem from different points of view: mean first passage time (MFPT), probability of return to a given site ($P_{s_0}$), and the total length displacement or number of visited lattice sites ($\Lambda$). We observe a double {\it resonant activation}-like phenomenon when we plot the MFPT and $P_{s_0}$ as functions of the intensity of the transition rate stochastic component.Comment: RevTex, 15 pgs, 8 figures, submitted to Eur.Phys.J.

Tax mix corners and other kinks

This paper models the local tax mix determination process in the presence of state-wide tax limitations and shows how excess sensitivity of local public spending to grants (the conventionally and somewhat misleadingly called flypaper effect) arises in the endogenously generated constrained tax mix and cannot in general be taken as a symptom of local government overspending. By means of a panel data switching regression approach that allows for fixed effects and endogenous selection, the paper exploits the clustering of Italian Provinces at the corners produced by upper and lower tax limitations, and provides evidence of considerable cap-generated excess sensitivity