Ricerc@Sapienza

Economic outcomes are strongly related to political decisions, and states policies affect the economy in several ways. There is limited knowledge of the underlying processes behind the decisions to spend, tax, and fix regulatory mechanisms and laws. Hoffman (2015) suggests that such processes are even less explored for the local public spending and for economic system outside the US. The history of Europe provides an excellent platform for studying and understanding the central role played by the state over the long run. Thus, the current proposal is aimed at entering the debate about how politics shape economic outcomes through states' decisions and looks at local public finance in a peripheral country of Europe, Italy, using a historical perspective. We want to take a first deep look into these central matters, studying the political process behind the local decisions to spend and to tax in Italy from the Unification (1861) to the outbreak of World War II. The analysis would try to investigate whether changes in political participation modified the size and composition of public spending at local level and whether it is possible to determine the reasons of different patterns of expenditure across municipalities based on political entitlement and participation.
The proposal investigates whether institutional shocks such as the enfranchisement of population and polity regime changes in the decision to implement public policies (i.e. decentralization vs centralization), which occurred in Italy since its unification, translate into policies favouring the adoption of pro-growth public goods. Indeed, by evaluating the size and the nature of public finance, as well as the entitled political groups, we will be able to say more about which social class, or clusters of interests, were mostly advantaged. Moreover, we intend to shed light on whether public choices, inspired by the adoption of effective pro-growth public policies, are incentives compatible.