Working Paper: CEPR ID: DP17171
Authors: Michela Giorcelli; Nicola Bianchi; 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 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.
Keywords: Fiscal Decentralization; Female Labor Supply; Childcare; Nursery Schools; Local Property Tax
JEL Codes: H71; H75; J20; H77; I21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal decentralization through the introduction of the local property tax (LPT) (H71) | Local spending (H72) |
| Fiscal decentralization through the introduction of the local property tax (LPT) (H71) | Municipal services (H70) |
| Increased availability of nursery schools due to fiscal decentralization (H52) | Female labor supply (J21) |
| Increased availability of nursery schools due to fiscal decentralization (H52) | Gender employment gap (J16) |
| Higher political competition measured by mayoral turnover (D79) | Local services (L84) |
| Higher political competition measured by mayoral turnover (D79) | Female employment (J21) |