Constitutional Reforms, fiscal decentralization and regional fiscal flows in Italy

In the last 15 years, Italy has been involved in a complex process of fiscal decentralization. In this context, data on fiscal flows are continuously produced and thrown in the political arena by several actors, with little scientific underpinnings and often with limited adherence to reality. This paper discusses the issue of fiscal federalism in Italy and presents a careful attempt to measure regional redistribution, or fiscal flows across regions. Our basic conclusions can be summarised as follows. Fiscal flows in Italy are huge and are mostly driven by the large difference in economic development between the different areas of the country. The public sector generally works in the direction of equalizing per capita (current) public expenditure across regions, at least for fundamental services. However, the distance in economic development, and therefore in tax revenues among regions, is so large that even this partial equalization is enough to generate consistent fiscal flows across the national territory.