Francesca Gastaldi

Budgeting and implementing fiscal policy in Italy

Forecast errors in budgetary variables are frequent. When systematic, they are a source of concern, as they signal misconduct in fiscal policymaking, undermine the government’s credibility and compromise long-term fiscal sustainability. This paper analyses the characteristics of fiscal forecasting and implementation errors in Italy using real-time data over the period 1998–2009. Several empirical methods are applied in order to identify the features of policymakers’ behaviour in preparing and implementing annual fiscal policy and to discover potential determinants in the formation of the implementation errors. Our results show that implemented budgetary plans systematically fall short one year ahead of ambitious planned adjustments for the main public finance aggregates. Fiscal illusion dominates revenue and GDP forecasting, and preliminary data releases are severely biased estimators of the final data, especially for expenditures. The role of the parliamentary session in driving a severe expenditure drift is confirmed.

Tax credits for dependent children and child benefits: what do we learn from the Italian experience?

This paper assesses the relative merits of tax credits for dependent children and child benefits in redistributing income and alleviating poverty in Italy. The main result is that the great emphasis put by Italian policy‐makers in designing tax credits in the last 15 years has been mostly misplaced if the aim was that of supporting low‐income households. On the other hand, child benefits – potentially a more effective tool – have not proven to be a growing source of redistribution in the same period. Overall, the Italian experience shows a rather uncertain path in helping families with children, with comparable results achieved by very complex and much simpler tax/benefit systems.