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The Political Economy of Inter-Regional Fiscal Flows

The Political Economy of Inter-Regional Fiscal Flows

Measurement, Determinants and Effects on Country Stability

Studies in Fiscal Federalism and State–local Finance series

Edited by Núria Bosch, Marta Espasa and Albert Solé Ollé

Struggles over what a region receives, or should receive, from the budget of the central government are common to many countries. Discussions often focus on the measures of ‘net fiscal flows’ or ‘fiscal balances’ provided by the government or other actors. This unique book shows just how these flows are computed then interpreted and clarifies the often misunderstood economic and political motives that explain why some regions receive more monies than others.

Chapter 4: Constitutional Reforms, Fiscal Decentralization and Regional Fiscal Flows in Italy

Maria Flavia Ambrosanio, Massimo Bordignon and Floriana Cerniglia

Subjects: economics and finance, public finance, politics and public policy, public policy


Maria Flavia Ambrosanio, Massimo Bordignon and Floriana Cerniglia 1 INTRODUCTION In the Italian case, the issue of measuring regional redistribution, or fiscal flows across regions, has not only a scientific interest. In the last 15 years, the country has been involved in a complex, confused and unfinished process of fiscal decentralization. A constitutional reform, approved in 2001 and which should have consolidated the new financial and political relationships between governments, is still waiting to be applied. The sharp difference in the level of economic development across areas of the country, with the consequent high level of territorial redistribution, has been both one of the main causes of the decentralization process, and the main obstacle for its conclusion. The worsening conditions of the economy, which has seen the rate of growth halving in the 2000s with respect to the 1990s, and the consequent financial difficulties of the public sector, have contributed to exacerbate the distributional conflict between territories. Regional parties, playing the role of advocates for the respective territories, have seen increasing political support, although they still collect only a minority of electoral support. In this context, data on fiscal flows are continuously produced and thrown into the political arena by various actors, political parties, interest groups and media alike, with little scientific underpinnings and often with limited adherence to reality. The confusion in the debate is facilitated by the poor quality of official data concerning regional expenditure and revenue, possibly a result of the national tradition of strong centralization of...

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