What happens to interregional redistribution upon fiscal decentralization? Evidence from the Italian NHS

This paper explores how pressures for an increased decentralization of taxing powers to sub-national governments may affect the degree of income redistribution across regional territories accomplished by the Italian NHS. In Italy, political responsibilities for health care are decentralized to regional governments, but the central government retains a critical role in ensuring all citizens uniform access to health services. To this end the central government runs an expenditure needs equalizing system to top up regional governments own resources. However, this system is currently put under question by strong political pressures calling for a weakening of central government involvement. Applying a well developed econometric approach we find that the NHS currently reduces interregional differences in per-capita income by about 7% of GDP. A reform of the NHS in terms of a reduction of expenditure standards produces a weakening of redistribution across jurisdictions, the size of which crucially depends on the financing arrangements of health care that will be actually adopted. We conclude that the decentralization of the NHS would give rise to relevant policy issues concerning in particular the different health care spending possibilities across regions and the impact on the interregional mobility of patients.