Leonzio Rizzo

Allocating the U.S. Federal Budget to the States: The Impact of the President

This paper provides new evidence on the determinants of the U.S. federal budget allocation to the states. Departing from the existing literature that gives prominence to Congress, we carry on an empirical investigation on the impact of presidents during the period 1982–2000. Our findings suggest that federal budget allocation is affected by presidential politics. States that heavily supported the incumbent president in past presidential elections tend to receive more funds, while marginal and swing states are not rewarded. Party affiliation also matters since states whose governor belong to the same party of the president receive more federal funds, while states opposing the presidents party in Congressional elections are penalized. These results show that presidents are engaged in tactical distribution of federal funds and also provide good evidence in support of partisan theories of budget allocation.

Local Provision of Training in a Common Labor Market

This paper analyzes how an inefficient level of training expenditure is determined in a common labor market. In each region there is a planner which maximizes net product by choosing training expenditure and a firm which maximizes profit by choosing wage. Each region is also characterized by different training systems from a productive point of view. Under these assumptions any of the two planners would choose a level of training expenditure which is too low from the point of view of the other planner. The economic insight for this result is that the existence of worker mobility generates a positive externality. With our model we are able to show that if the difference in productivity between the two training systems is not too high, both regions will choose to implement the efficient centralized solution, internalizing externalities. Otherwise, the region with the more productive training system would not agree with the centralized solution.

Spillover effects in local public spending

ABSTRACT This paper investigated the fiscal interactions between Italian municipalities over the period 2001–11 and found a positive horizontal interdependence in spending decisions. The results are robust to different specifications of the spatial neighbours and are confirmed by a natural experiment (an earthquake in the Abruzzo region of Italy in 2009) that creates an exogenous variation in the neighbours’ spending. Furthermore, there is no evidence of yardstick competition when one considers political effects, while a negative relationship is found between spatial interaction and the size of the municipality. Thus, it can be concluded that spillover effects drive the strategic interactions in spending decisions.

Does intermunicipal cooperation promote efficiency gains? Evidence from Italian municipal unions

Inter-municipal cooperation is a common way to provide local public services, exploit economies of scale and internalize externalities. However, little is known about possible efficiency gains. We test their existence in terms of local public expenditures reductions, by investigating the Italian experience of municipal unions. We adopt quasi-experimental methodologies using administrative data on municipalities in the Emilia Romagna region. We find that being in a municipal union reduces the total per capita current expenditures by around 5 percent, without affecting the level of local public services. The effect is robust, persistent and increasing up to six years after entrance.

Fiscal equalization under political pressures

We examine the design of fiscal equalization transfers aimed at inter-regional redistribution in a setting in which special interest groups distort the fiscal policies of local governments. Equity always calls for tax-base equalization while efficiency calls for tax-base equalization of fiscal capacities backed by strong lobby groups and for tax-revenue equalization of those backed by weak lobby groups. Hence, it is optimal to rely only on tax-base equalization if the special interest groups are similar in terms of lobbying power, whereas a mixed system is optimal if they are highly heterogeneous. Tax competition reinforces the role of tax-base, while tax exporting that of tax-revenue, fiscal equalization.

Fiscal needs and standard costs: an empirical analysis for Italian municipalities of Puglia

The law 42/2009 proposes a new financial system of municipal expenditures using fiscal needs estimates. Our work estimates the six main expenditure functions, as defined by law, by identifying need and cost determinants. After estimating standard expenditures we propose two different methods of resource allocation: one on estimated standard needs for a given average cost; and the other on standard estimated cost for a given average need. We use municipal data of Puglia.

Le inefficienze della competizione fiscale: una rassegna dei principali modelli teorici

The choice of local tax rates and local public good levels in an interregional economic system cannot be efficient when there is mobility of persons or goods. In fact in a federal system each region chooses tax rates and/or local public goods taking into account only the level of its welfare and not the level of the welfare of all regions of the federation. We examine how the literature deals with this issue, looking at some interesting particular cases: tax competition on consumption goods (Mintz - Tulkens, 1986; Kanbur - Keen, 1993; Bordignon, 1995; Hamilton - Slutsky, 1997; Scharf, 1999) and on factors of production (Zodrow - Mietzkowsky, 1986 Wildasin, 1988; Bucotvesky, 1991; Wilson, 1986; 1991). We discuss the policy implications of these theoretical analyses, pointing out the empirical relevance of the fiscal relationship among regions in a federation (Besley - Case, 1995; Besley - Griffith - Klemm, 2001; Devereux - Lockwood - Redoano, 2002). We finally discuss some recent literature on the role of vertical externalities (Keen - Kotsogiannis, 2002; Rizzo, 2005) and interregional transfers (Wildasin, 1991; Dalbhy, 1996; Bucovetsky - Smart, 2002; Esteller-More - Sole-Olle, 2002; Kothenburgen, 2002; Rizzo, 2003).

Spatial interaction in local expenditures among italian municipalities: evidence from italy 2001-2011

We investigate the existence of spatial interaction in spending decisions among Italian municipalities. We estimate a spatial autoregressive dynamic panel data model, using information on 5,564 Italian municipalities over the period 2001-2011, exploiting their border contiguity as a measure of spatial neighborhood. We find a positive effect of neighboring expenditures on total, capital and current expenditures of a given municipality. We do not find any evidence of yardstick competition when we take account of political effects, while we find a negative relationship between spatial interaction and the size of the municipality for current expenditure. Thus, we conclude that spillover effects drive the strategic interaction.

Switch towards tax centralization in Italy: a wake up for the local political budget cycle

The abolition of the municipal property tax on owner-occupied dwellings accomplished in Italy in 2008 offers a quasi-natural experiment that allows for the identification of the presence of political budget cycles - the incentives for municipalities close to elections to manipulate policy outcome decisions. Our empirical analysis shows that the reform impacted on municipalities that in 2008 were in their pre-electoral year, by expanding the size of their budget in the form of an increase of current expenditure and fees and charges, but this did not occurred in municipalities that experienced their pre-electoral year before 2008.

Abolizione delle province e riallocazione delle spese: il caso della Lombardia

The law 56/2014 (the so-called Delrio law), endorsed by the Lombardy region with the regional law 19/2015, defines the core spending functions that must remain in the hands of provinces. The remaining non-core functions will be, according to the law, managed by the regions. In this paper we identify the core functions by comparing those of the actual provincial budget to those defined by the Delrio law. We then propose to quantify the possible savings by comparing per capita expenditures (remained to provinces) of demographically similar provinces. In particular, we compare per capita expenditures of Lombardy provinces with per capita average expenditure of Italian provinces belonging to the respective population class. In addition, the work, identifies efficient management areas of non-core functions that the law 56/2014 delegates to regions.