Public Co-Financing of Private Sector's Investments: Subsidiarity and Corruption

The literature on corruption makes unclearpredictions on the relations betweensubsidiarity principle, according to whichpublic decisions should be done at thelower level government possible, andcorruption of public officials. In thispaper, we compare two alternative regimes,centralised vs. decentralised, forthe public co-financing of privateprojects. We show that, in the absence ofcorruption, the two regimes give the same results. Borrowing from the Chamberlin's analysis ofmonopolistic competition and from therent-seeking literature, we introducecorruption in the model as a selling costfor the private suppliers. We show that acentralized regime causes higher corruptionlevels because of the higher number ofprivate suppliers of competing projects. Asa result, a central government tends tohave a higher level of public capitalexpenditure than two (equally corruptible)regional governments.     

Bureaucratic institutional design: the case of the Italian NHS

We propose a model where a regional government’s choice of the number of bureaucratic agencies operating in a region depends upon the degree of substitutability and complementarity of the bureaucratic services being demanded. We show that, if the government perceives the citizens’ demand as a demand for substitutable services, it will choose provision by two independent agencies. If the government perceives the citizens’ demand as a demand for complementary services, it will choose provision by a single consolidated agency. Exogenous shocks to the number of citizens amplify these incentives. Evidence from the Italian National Health Service (NHS) supports this hypothesis. Results show a positive effect of proxies of substitutable services on the number of regional local health authorities and a negative effect of proxies of complementary services. The major immigration amnesties, taken as shocks to the number of citizens entitled to the service, magnify these effects.     

The Laffer effects of a program of deregulation cum detaxation: the Italian reform of labour contracts in the period 1997–2001

We examine the Laffer effects of the policy of social security tax reduction cum partial deregulation of labour market undertaken in Italy in the period 1997–2001. Laffer effects of tax cut are generally delayed and governments responsible of the reform cannot benefit from the resulting increased revenues when in office. Our empirical findings show that tax cuts combined with policies of liberalization determine almost immediate Laffer effects. In terms of coherent supply-side political programs, the effects of the two measures are not separable. Reflection on our results may broaden the scope of the supply-side policies of deregulation and detaxation.

Opportunism and MPs’ chances of re-election: an analysis of political transformism in the Italian parliament

Public Choice - We identify as political transformists the Italian members of parliament (MPs) who cross the aisle and vote for legislation opposed by their own political group—i.e., MPs who...     

Competing bureaus and politicians: A compliance approach to the diversion of public funds

This article analyzes the effects of the compliance relationship between the governing party and two competing bureaus producing differentiated goods. We assume that the three players simultaneously and independently take their decision in terms of production and rents with perfect knowledge of each others strategies. Unlike Niskanen's competitive results, which are invariant with respect to the monopoly solution and only depend on the characteristics of the review process, here the budgetary equilibrium changes depending on the nature of the goods supplied by the competing bureaus and is affected both by their demand and cost conditions and by the resources available to the governing party.     

EU VAT frauds

The paper analyzes the VAT frauds issues in the European Union after the abolition of the internal customs. All the suggested solutions based on the origin principle create distortions in the “one market” and have a doubtful efficiency. The reverse-charge regime for all business to business transactions joint with VAT at the last stage also creates heavy discriminations. The current system based on the destination principle joint with ad hoc measures—such as specific reverse-charge, rebate and margin regime under evidence that VAT due has been paid, joint/several liability…—and a consistent information-exchange-system may provide a less distorting solution.     

Voting Powers and the Efficiency of the Decision-Making Process in the European Council of Ministers

We analyse the efficiency effects in combination with some accepted fairness criteria for the voting games in the European Council of Ministers (ECM) under the qualified majority voting (QMV), before and after the Nice new scheme, in comparison with hypothetical simple majority voting rules (SMV), by jointly examining voting weights and voting powers. The differences between the voting weights and the voting powers increase considering the attitude of the Governments of the Member States of the ECM, to form voting-blocs'—historically that among France, Germany and Belgium and, more recently, the bloc between the United Kingdom and Spain. Their voting powers by blocking proposals result in stalemates and weak compromise with likely benefits for existing well organised interest groups. Unexpectedly, the enlargement of EU from 12 to 15 States, with the diminution of the voting weights of the member countries has not reduced the decisional deficit of QMV, basically because the incentive toward blocs' formation has been reinforced. And, while the power of getting a proposal approved has diminished, the veto-power has remained very high. The effects of the new dual QMV rule, based on a new distribution of votes and correcting the unbalance against the big countries with their demographic weights, for the enlargement to 27 States, seems to go in the same direction. The adoption of a dual SMV, would solve the problems of decision efficiency, with a fairness constraint to protect the major countries. To make this voting rule acceptable one might adopt the Buchanan and Tullock (1962) distinction between constitutional principles to whom the unanimity or QMV might be reserved and post constitutional rules suitable to SMV. Clubs of enhanced co-operation among countries with more homogeneous preferences could also ease the application of SMV.