This work analyses the relationship between the efficiency gains and the redistributive impact of the reform aimed at introducing fiscal federalism in Italy. In the recent past the reform substituted fiscal transfers once provided by central government with local taxes. By 2001 an equalization Fund will ensure that regional governments have sufficient revenues to provide a minimum standard level of public services. Efficiency gains will arise as financial transfers provided by the Fund will be subject to a limit, thus strengthening local budget constraints. In some regions the new set-up may determine a reduction of total revenues below the amount needed to keep the present level of expenditures. This gap should widen in the presence of regional growth differentials.
Published in 2001 in: Studi economici, v. 56, 73, pp. 131-148
