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

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

Business taxation and economic performance in hierarchical government structures

This paper models theoretically and investigates empirically the consequences on local economic performance of state mandates on financially distressed authorities. In particular, I analyze the switch from systematic state bailout of regional health care deficits to selectively mandated hikes in regions’ own business income tax rates that took place in Italy around the mid 2000s, and exploit such dramatic switch to identify the impact of tax policy on the economy. I model factor input use within a multi-jurisdiction neoclassical framework, where production takes place in plants, and physical capital requires energy in fixed proportions depending on the size of energy-saving capital that is installed along with physical capital. Energy-saving capital can be interpreted either as tangible information technology (IT) equipment (e.g., computer-aided line speed control devices) or as intangible assets (e.g., process design skills) lowering a plant energy requirement. The estimation results based on panel data for the Italian provinces and regions over a decade (2000-2010) reveal that, by raising the user cost of capital, mandated business income tax hikes stimulate province-level business energy use, lending support to the hypothesis of short run substitution between energy and energy-saving capital, and hamper the employment of human resources in science and technology (S&T) occupations, the latter being interpretable as a proxy for energy-saving capital

The electoral migration cycle

*very preliminary* This paper puts forward a new test of Tiebout sorting that relies on the exo-geneity of the time structure of recurrent local elections. The test is based on the idea that the policy uncertainty induced by competitive local elections should be expected to generate an electoral migration cycle in terms of relatively low rates of migration before elections, followed by relatively high rates of migration after the electoral uncertainty is resolved. Conversely, interjurisdictional migra-tion ows that are unrelated to local public service provision motives ought to be orthogonal to the timing of local elections. Empirically, I study voting and sorting across several thousands of peninsular Italys municipalities through the increasingly turbulent 2002-2013 decade. I \u85nd evidence of an electoral migra-tion cycle, in the sense that the timing of internal migration ows across Italian municipalities is systematically inuenced by the staggered schedule of mayoral elections, and of an impact of electoral uncertainty indicators on voice and exit patterns. JEL classi\u85cation: D72; H77; C23. Key words: Tiebout sorting; internal migration; electoral uncertainty; vot