Abstract

This paper deals with the finances of local authorities in Italy after the Unification. It focuses on the the interaction between the legal framework and the regional gaps in expenditures. The legislation (with the so called decreto rattazzi and the 1865 law) prescribed uniform tasks and bureaucracies but left to each authority the funding, without almost any subsidy from the central government. This was mainly an ideological choice. However the systme did not work, and at the end of the 19th century the state was forced to change it. It had two options - either to reform the local finance law, introducing some sort of automatic transfer from the rich regions to the poor ones, or to subsidize directly the poor areas out of the state funds. It chose the second alternative.