The Impact of Fiscal Decentralization on the Composition of Public Expenditure: Panel Data Evidence from Italy

This article is an original contribution to the understanding of the relationship between fiscal decentralization and public expenditure composition. It studies the effects of the ongoing decentralization process in Italy on the share of different categories of public spending in total expenditure of the Italian regional administrations over the period 1996-2008. The data used allow to go beyond the usual distinction between current and capital expenditures and to present a functional classification of public expenditures. Through a panel data analysis, the paper shows that the level of decentralization influences the expenditure composition.