Immobilism By Design: Fiscal Devolution and Territorial Inequality in Italy

The Italian welfare state, even before decentralizing reforms that began in the late 1990s, was well known for large differences in the level of protection offered to residents across the country’s twenty regions.  The fiscal and administrative decentralization of Italy’s welfare state prompted many to fear, and some to hope, that increasing cross-regional inequalities in social provision would occur.  This paper studies cross-regional differences in welfare spending during the timespan of devolutionary reforms.  Our analysis shows that, contrary to expectations, there has been remarkably little increase in the differences between regions in social spending since 2003, the earliest date for which we have reliable spending data.  In light of the fact that the reforms are taking place in a context of pronounced regional differences in wealth, fiscal capacity and economic development, this is a surprising finding.  We argue that combination of partisan divisions over the form of decentralization and extensive built-in self-decelerating mechanisms in those reforms that were adopted have meant that bold announcements of transformation did not yield sharp upsurges in inequality between the wealthy regions with strong fiscal capacity and those without.  Instead, a pattern of immobilism and reversion to the status quo ante of significant regional redistribution has emerged.  We investigate how these immobilizing influences on policy have concatenated to form a pronounced bias towards stability in the regional distribution of social spending.