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Municipal Finance in Southern Italy: Structural Criticalities and the Effects of the Pandemic Crisis

Author

Listed:
  • Alfredo Bardozzetti

    (Bank of Italy)

  • Paolo Chiades

    (Bank of Italy)

  • Anna Laura Mancini

    (Bank of Italy)

  • Vanni Mengotto

    (Bank of Italy)

  • Giacomo Ziglio

    (Bank of Italy)

Abstract

Southern municipalities suffer, historically, from structural weaknesses that make them unable to provide services at the same level of their northern counterparts: they have a smaller tax base, not sufficiently compensated by the transfer system, and less capacity of collecting revenues. They suffered more than the northern ones the period of heavy budget consolidation in 2011–2016 because their structure of spending is more rigid, and because they more heavily depend on national transfers. Thanks to the European structural funds, capital spending followed a different path and its per-capita level is still somewhat larger in the south than in the north of the country. The huge increase in central government grants during the 2020–21 period, to compensate for the revenue losses and the higher expenses related to the pandemic crisis, favoured a temporary improvement in their budgetary conditions, but as the effect of these massive transfers fades out, the structural problems are re-appearing. Looking ahead, the difficulties of the southern cities can only be overcome through the completion of the federalist reform process with: (a) the definition of the essential levels of service (and the related expenditure needs) to be provided by the municipalities for the fundamental functions; (b) the restoration of a true tax autonomy and the strengthening of the collection capacity; (c) the implementation of an equalisation system that takes full account of the differences in spending needs and fiscal capacity.

Suggested Citation

  • Alfredo Bardozzetti & Paolo Chiades & Anna Laura Mancini & Vanni Mengotto & Giacomo Ziglio, 2024. "Municipal Finance in Southern Italy: Structural Criticalities and the Effects of the Pandemic Crisis," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 1233-1279, November.
  • Handle: RePEc:spr:italej:v:10:y:2024:i:3:d:10.1007_s40797-024-00288-0
    DOI: 10.1007/s40797-024-00288-0
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    References listed on IDEAS

    as
    1. Picchio, Matteo & Santolini, Raffaella, 2020. "Fiscal rules and budget forecast errors of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 64(C).
    2. Veronica Grembi & Tommaso Nannicini & Ugo Troiano, 2016. "Do Fiscal Rules Matter?," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 1-30, July.
    3. Massimiliano Ferraresi & Giuseppe Migali & Leonzio Rizzo, 2018. "Does intermunicipal cooperation promote efficiency gains? Evidence from Italian municipal unions," Journal of Regional Science, Wiley Blackwell, vol. 58(5), pages 1017-1044, November.
    4. Chiades, Paolo & Greco, Luciano & Mengotto, Vanni & Moretti, Luigi & Valbonesi, Paola, 2019. "Fiscal consolidation by intergovernmental transfers cuts? The unpleasant effect on expenditure arrears," Economic Modelling, Elsevier, vol. 77(C), pages 266-275.
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    Cited by:

    1. Antonio Accetturo & Giuseppe Albanese & Maria Paola & Roberto Torrini, 2024. "The North–South Gap: Economic Development and Public Intervention," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 957-975, November.

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    More about this item

    Keywords

    Municipal finance; Southern Italy; COVID 19; Regional disparities;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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