Fiscal residua and federalist reform in Italy. Will regional and redistributive policies survive?

Abstract

This paper criticizes the idea to conceive the fiscal federalist reform in Italy as a tool to empower central-northern regions to retain resources otherwise wasted in the South. We argue that such a view muddles up efficiency and redistribution issues, thus threatening the legitimate inter-regional fiscal flows. To dispute the thesis of excessive transfers to Mezzogiorno regions, we first show that the regional distribution of (both current and capital) government expenditure has systematically penalized the South in the last 15 years. Secondly, for the years 2004-2006, we calculate «benchmark» regional fiscal residua, consistent with the progressive Italian personal taxation (IRPEF), and the announced targets of regional policies (45% of total capital government expenditure to be made in the South). For most centre-northern regions, the actual residua turn out to be lower than the «benchmark» ones.Mezzogiorno, redistribution, inter-governmental relations, federalism, regional development policies