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Subsidies, Negotiated Planning and Public Enterprise in the Italian Mezzogiorno

Domenico Scalera () and Alberto Zazzaro ()

QA - Rivista dell'Associazione Rossi-Doria, 2002, issue 3

Abstract: 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.

Keywords: Mezzogiorno; Financial Subsidies; Negotiated Planning; Public Enterprises (search for similar items in EconPapers)
JEL-codes: H25 H54 R58 (search for similar items in EconPapers)
Date: 2002
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