The Effects of Fiscal Decentralisation on Publicly Provided Services and Labour Markets

Nicola Bianchi, Michela Giorcelli and Enrica Martino

The Economic Journal, 2023, vol. 133, issue 653, 1738-1772

Abstract: This paper studies how fiscal decentralisation affects labour supply. It explores a 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 decentralisation that stems from differences in the average age of buildings caused by World War II bombings. Decentralisation expanded municipal services, such as nursery schools, especially in areas with greater political competition. The paper then investigates how the reform affected labour markets. Decentralisation increased female labour supply—probably through expanded availability of nursery schools—thereby reducing the gender gap in employment.

Date: 2023
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Related works:
Working Paper: The Effects of Fiscal Decentralization on Publicly Provided Services and Labor Markets (2022)
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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