Chiara Rapallini

Voting by Ballots and Feet in the Laboratory

This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout model as a decentralized system of public goods provision. Tiebout (1956) shows that if a sufficient number of local communities exist to accommodate different types of preferences, individuals sort themselves in a way that provides an efficient allocation of public goods and taxes. Our experiment aims to disentangle the effect of voting participation from other factors and is composed of two treatments. In the non-participation treatment, local public good provision is chosen by only one subject, while other members of the community can only stay in or move to another community. In the participation treatment, all the community members have the right to vote as well as to move to another community and collective decisions are taken by majority rule. Our findings show that social welfare is greater in the participation than in the non-participation treatment. We conclude that voting with one?s feet increases efficiency if all the community members vote and that the influence of voting participation on the allocation of local public goods should be taken into account to assess the viability of the Tiebout model.

Municipality Budget Rules and Debt: is the Italian regulation effective?

In this paper we investigate the Italian regulation on local government budget related to the European fiscal rules (the so-called Domestic Stability Pact), the Constitutional golden rule, and the pre-existing ceilings on new borrowing, with the intent to study the overall effect on local debt and investment expenditure. Our focus is on the municipality level of government. We use a dataset encompassing the main budget items of virtually all municipalities for the period 1999-2009 to perform panel estimation of the efficacy of local fiscal rules in terms of debt reduction and to detect possible unintended effects on investment spending. Empirical evidence supports the conclusion that the Italian system suffers from a lack of coordination between budget constraints and borrowing limits. Our main conclusion is that the decentralization process in Italy has not found an adequate solution yet: on the one hand, local administrations are not equipped to deal with the increased financial responsibility and the progressive sophistication of financial markets; on the other hand, central government has been inconsistent in devolving fiscal powers to municipalities while at the same time adopting multi-layered regulations to restrain local fiscal autonomy in order to pursue the overall public finance control.

Family taxation and labour market participation incentives in Italy

The potential implications of using the family as opposed to the individual as the unit of taxation are not clear. This applies both to work incentives and distributional outcomes. In this paper we evaluate the effects of a hypothetical reform of Italian income taxation both on labour supply incentives and on redistribution of income between families with different composition and income levels. In particular, we analyze the potential effects of a shift from the current system of individual taxation to a system of family taxation similar to the French family-splitting approach by implementing a tax-benefit model. Based on data from the Bank of Italy Survey of Household Income and Wealth, our simulations show a reduction in the degree of progressivity and a disincentive for the labour supply of additional earners within the family.