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Subsidies, Negotiated Planning and Public Enterprise in the Italian Mezzogiorno


  • Domenico Scalera
  • Alberto Zazzaro


Currently, the main form of public intervention in the Mezzogiorno are the financial subsidies and the so-called negotiated planning instruments. In this paper, we argue that both these kind of policies show a number of relevant drawbacks. Financial subsidies fail to stimulate additional investments, lead to investment oversizing, encourage clientelism, raises transaction costs and rent-seeking activities. Negotiated planning complicates the institutional context, reinforces local bureaucracies, reduces policy’s accountability, creates opportunities for political trade-offs, and makes rent-seeking profitable. By contrast, we believe that in order for the abundant resources still untapped in the Mezzogiorno to be directed towards activities favourable for development, it is necessary to debureaucratize its economy, removing opportunities for rich pickings from political groups, bureaucracies and local potentates. To this end, we argue that a different and ‘more extreme’ combination of measures, involving automatic incentives and a new active role of the public sector in the production of goods and services, could yield better results.

Suggested Citation

  • Domenico Scalera & Alberto Zazzaro, 2002. "Subsidies, Negotiated Planning and Public Enterprise in the Italian Mezzogiorno," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 3, November.
  • Handle: RePEc:rar:journl:0165

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    References listed on IDEAS

    1. Jörg Finsinger & Ingo Vogelsang, 1985. "Strategic Management Behavior Under Reward Structures in a Planned Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 263-269.
    2. Mo-Yin S. Tam, 1985. "Reward Structures in a Planned Economy: Some Further Thoughts," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 279-289.
    3. Justman, Moshe & Thisse, Jacques-Francois & van Ypersele, Tanguy, 2002. "Taking the bite out of fiscal competition," Journal of Urban Economics, Elsevier, vol. 52(2), pages 294-315, September.
    4. Mo-Yin S. Tam, 1981. "Reward Structures in a Planned Economy: The Problem of Incentives and Efficient Allocation of Resources," The Quarterly Journal of Economics, Oxford University Press, vol. 96(1), pages 111-128.
    5. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
    6. Altunbas, Yener & Evans, Lynne & Molyneux, Philip, 2001. "Bank Ownership and Efficiency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 926-954, November.
    7. Ian King & R. Preston McAfee & Linda Welling, 1993. "Industrial Blackmail: Dynamic Tax Competition and Public Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 590-608, August.
    8. Yuill D. & Wishlade F., 2001. "Sviluppi recenti nella politica regionale degli Stati membri dell'Unione europea: una rassegna comparativa dei cambiamenti," Rivista economica del Mezzogiorno, Società editrice il Mulino, issue 1-2, pages 251-340.
    9. repec:hrv:faseco:30727607 is not listed on IDEAS
    10. Alfredo Del Monte & Domenico Scalera, 2001. "The Life Duration of Small Firms Born Within a Start-up Programme: Evidence from Italy," Regional Studies, Taylor & Francis Journals, vol. 35(1), pages 11-21.
    11. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
    12. S. Lodde, 2002. "Patti Territoriali e specializzazione produttiva nel Mezzogiorno," Working Paper CRENoS 200211, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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    More about this item


    Mezzogiorno; Financial Subsidies; Negotiated Planning; Public Enterprises;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy


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