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

Nicola Bianchi, Michela Giorcelli and Enrica Martino

No 17171, CEPR Discussion Papers from Centre for Economic Policy Research

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 (search for similar items in EconPapers)
JEL-codes: H71 H75 H77 I21 J20 (search for similar items in EconPapers)
Date: 2022-04
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Related works:
Journal Article: The Effects of Fiscal Decentralisation on Publicly Provided Services and Labour Markets (2023)
Working Paper: The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets (2021)
Working Paper: The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets (2019)
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