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The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets

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  • Bianchi, Nicola
  • Giorcelli, Michela
  • Martino, Enrica Maria

Abstract

This paper studies how fiscal decentralization affects local services. It explores a 1993 reform that increased the fiscal autonomy of Italian municipalities by replacing government transfers with revenues from a local property tax. Our identification leverages cross-municipal variation in the degree of decentralization that stems from differences in the average age of buildings caused by bombings during WWII. Decentralization reduced local spending but expanded municipal services, such as nursery schools. These effects are larger in areas with greater political competition. The paper also investigates how the reform affected labor markets. Decentralization increased female labor supply—probably through expanded availability of nursery schools—thereby reducing the gender gap in employment.

Suggested Citation

  • Bianchi, Nicola & Giorcelli, Michela & Martino, Enrica Maria, 2022. "The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets," CEPR Discussion Papers 17171, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17171
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    Cited by:

    1. Jeffrey Clemens & Stan Veuger, 2024. "Intergovernmental Grants and Policy Competition: Concepts, Institutions, and Evidence," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    2. Sidra Naeem & Rana Ejaz Ali Khan, 2021. "Fiscal Decentralization and Gender Equality in Developing Economies: Dynamics of Income Groups in Economies and Corruption," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(9), pages 745-761, September.
    3. Ricardo Dahis & Christiane Szerman, 2023. "Decentralizing Development: Evidence from Government Splits," Monash Economics Working Papers 2023-18, Monash University, Department of Economics.
    4. Simone Maxand & Hend Sallam, 2024. "Local Fiscal Effects of Immigration in Germany," CESifo Working Paper Series 11162, CESifo.
    5. Wookun Kim, 2023. "Migration, Commuting, and the Spatial Distribution of Public Spending," Departmental Working Papers 2305, Southern Methodist University, Department of Economics.
    6. Davide Cipullo, 2023. "When Women Take All: Direct Election and Female Leadership," CESifo Working Paper Series 10229, CESifo.

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    More about this item

    Keywords

    Fiscal decentralization; Female labor supply; Childcare; Nursery schools; Local property tax;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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