Impact of redirection of transfers to the Italian South on output and employment to 2000

Since 1950 the Italian South has greatly depended on transfers from the Central Government that were labeled public extraordinary expenditures. Starting in 1986 legislation was passed to streamline these transfers with annual planning. By 1992, the mechanism for extraordinary expenditures was dismantled but not completely abolished with the aim of consolidating and controlling the budget. The objective of this paper is to evaluate the consequences of such a policy for the short run and the long run in terms of output and employment. Since the South has continued to lag behind the North, will it be able to manage and eventually close the gap with the North? To evaluate the impact of the 1992 regional policy change affecting the South, we employ alternative expenditure scenarios via multi-regional input-output techniques. At the time of this research, the latest MRIO for Italy was available for 1985. The outcome of this exercise would ultimately indicate to policy makers the impact of changes in the structure of expenditures needed to help the South in the process of development.