Abstract We study the fiscal and allocative inefficiencies of Italy’s coastal concession system, where state-owned beach areas are leased through administrative procedures rather than market-based mechanisms. Combining firm-level financial statements with administrative records on maritime concessions, we document substantial regional disparities in revenues, profits, and lease fee compliance. Concession fees are loosely correlated with firm revenues but unrelated to profits, indicating weak alignment with economic fundamentals. Building on a heterogeneous-agent framework, we develop a heterogeneity-adjusted pricing formula that reveals systematic under-pricing across regions --- particularly in Southern Italy and the Islands. Using firm-level predicted valuations derived from a machine learning model, we simulate counterfactual auctions under various formats. Results suggest that transitioning to competitive tenders could raise public revenues by over 60\% without significant losses in allocative efficiency. Our findings support recent European Court of Justice rulings that mandate transparent, competitive allocation of natural resources and offer a generalizable framework for reforming concession systems across jurisdictions. JEL codes: D43, D44, H44, L22, L83.
Caggiano et al. (Mon,) studied this question.
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