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

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  • Nicola Bianchi
  • Michela Giorcelli
  • Enrica Maria Martino

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 identifica- tion 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

  • Nicola Bianchi & Michela Giorcelli & Enrica Maria Martino, 2021. "The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets," NBER Working Papers 29538, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29538
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    1. 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.
    2. Davide Cipullo, 2023. "When Women Take All: Direct Election and Female Leadership," CESifo Working Paper Series 10229, CESifo.
    3. Jeffrey Clemens & Stan Veuger, 2023. "Intergovernmental Grants and Policy Competition: Concepts, Institutions, and Evidence," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    4. Dahis, Ricardo & Szerman, Christiane, 2024. "Decentralizing Development: Evidence from Government Splits," IZA Discussion Papers 16761, Institute of Labor Economics (IZA).
    5. Ricardo Dahis & Christiane Szerman, 2024. "Decentralizing Development: Evidence from Government Splits," CESifo Working Paper Series 10927, CESifo.
    6. Wookun Kim, 2023. "Migration, Commuting, and the Spatial Distribution of Public Spending," Departmental Working Papers 2305, Southern Methodist University, Department of Economics.
    7. Ricardo Dahis & Christiane Szerman, 2023. "Decentralizing Development: Evidence from Government Splits," Monash Economics Working Papers 2023-18, Monash University, Department of Economics.

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    More about this item

    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
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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