Front Matter Page

© 2000 International Monetary Fund

July 2000

IMF Country Report No. 00/82

Italy: Selected Issues

This Selected Issues report on Italy was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with this member country. As such, the views expressed in this document are those of the staff team and do not necessarily reflect the views of the Government of Italy or the Executive Board of the IMF.

International Monetary Fund

Washington, D.C.

Front Matter Page

INTERNATIONAL MONETARY FUND

ITALY

Selected Issues

Prepared by a staff team consisting of Marco Annunziata, Jörg Decressin, and Ioannis Halikias (EU1), and István Székely (FAD)

Approved by the European I Department

May 19, 2000

Contents

• Basic Data

• Introduction and Overview

• I. Puzzling Out Italy’s Growth Performance

  • A. Demand-Side Developments

  • B. Structural Impediments

    • The labor market

  • C. Concluding Remarks and Policy Implications

• Tables

• 1. Growth Performance, 1980-99

• 2. Demographics and Growth, 1980-99

• 3. Simulating Identical Fiscal and Monetary Policy Stance, 1992-98

• 4. Decomposing Growth Differentials, 1992-98

• 5. Product Market Regulation

• 6. Educational Attainment and Expenditure, 1995-96

• 7. Selected R&D Indicators, 1997-98

• 8. Labor Taxation, 1980-96

• 9. Capital Taxation, 1980-98

• 10a. Labor Market Regulation

• 10b. Labor Market Regulation, 1989-94

• 11. Center-North and South. 1980-99

• 12. Growth Accounting, 1980-98

• 13. Investment, 1980-99

• 14 Regional Employment Growth, 1980-98

• 15 Earnings Differentials, 1995

• Figures

• 1. Fiscal and Financial Indicators, 1990s

• 2. Capital-Output Ratios, 1980-98

• 3a. Labor Costs, 1980-98

• 3b. Real Wages 1980-98

• 4. Labor Supply Developments, 1980-98

• 5. Labor Demand Developments, 1980-98

• 6. Regional Labor Demand and Supply Differences, 1980-98

• 7. Center-North and South, 1980-99

• 8. Regional Labor Demand and Supply, 1980-98

• Text Boxes

• 1. Selected Data Issues

• 2. The Mezzogiorno Problem

• Data Appendix

• References

• II. Italy’s Fiscal Strategy in a Medium-Term Framework

  • A. The Budgetary Costs of Aging

    • Pensions

    • Health care

  • B. Economic Growth and the Size of Government

  • C. Two Illustrative Fiscal Scenarios

    • Baseline scenario

    • Reform scenario

    • The impact of higher productivity growth

  • D. Conclusions

• Tables

• 1. Fiscal Developments Under the Baseline Scenario

• 2. Fiscal Developments Under the Reform Scenario

• 3. Primary Current Expenditures Under the Two Scenarios

• Figures

• 1. General Government Revenues, Expenditures, and Balance Under the Baseline Scenario, 2000-45

• 2. Debt and Revenue Dynamics Under Different Deficit Rules in the Baseline Scenario, 2000-45

• 3. General Government Revenues, Expenditures, and Balances Under the Reform Scenario, 2000-45

• 4. Revenues and Expenditures Under Different Scenarios and Productivity Growth Assumptions, 2000-45

• 5. Public Debt, Revenues, and Primary Current Expenditures, 2000-45

• References

• III. The Evolving Role of Regions in Italy: The Financing and Management of Health Care Services

  • A. Introduction

  • B. Key Characteristics of Italian Regions

    • Geographic and demographic characteristics

    • Economic characteristics

  • C. Expenditure Assignments of Regions

    • Expenditure responsibilities of regions

    • Overall trends in public expenditure at the subnational level

  • D. The Management and Financing of the Public Health Care System

    • Macro efficiency

    • Macroefficiency and regional pattern of public health care expenditure

    • Financing of the NHS

    • Potential problems of decentralization

  • E. Revenues of Regional Governments

    • Own revenues

    • The new system of equalization

    • Potential problems

  • F. Borrowing by Regions

  • G. The Internal Stability Pact

  • H. Conclusions

• Tables

• 1. Key Characteristics of Regions

• 2. Regional Labor Market Indicators

• 3. Regions’ Contributions to GDP, 1980-96

• 4. Regional Per Capita GDP, 1996

• 5. Consolidated Fiscal Accounts of Subnational Governments, 1976-98

• 6. Expenditures of Subnational Governments

• 7. Expenditures of Regions, 1997-99

• 8. The Structure and Growth of Regional Current Health Care Expenditure

• 9. Growth of Real Health Care Expenditure, 1980-97

• 10. Regional Health Care Expenditure, 1994-97

• 11. Structure of Regional Health Care Expenditure in 1996

• 12. Sources of Health Care Finance, 1993-97

• 13. Own Revenues of Ordinary Statute Regions

• 14. Revenues of Ordinary Statute Regions

• 15. Structure of Tax Revenues in 1998

• 16. Per Capita Revenues of Regions in 1998

• Figures

• 1. Public Expenditures, 1997-99

• 2. Composition of General Government Deficit, 1977-99

• 3. The Share of Health Care Expenditure in GDP, 1960-97

• 4. The Share of Total Health Care Expenditure in GDP, 1970-97

• 5. Average Annual Growth Rates of Real Current Health Care Expenditure, 1961-95

• 6. Health Care Expenditure And Aging, 1970-97

• 7. Health Care Expenditure and Aging in the Rest of the European Union, 1970-97

• 8. Inequality Among Regions in Income and Health Care Expenditure, 1997

• 9. Interregional Inequality in Regional Tax Bases and Total Regional Budget Revenue, 1998

• 10. Projected Revenues of Regions in the First Year of the Transition

• 11. Interregional Inequality in Income and Budget Revenue, 1998

• 12. Capacity to Raise Additional Revenue from Regional Taxes by Increasing Tax Rate

• 13. Projected Total Revenues of Regions in the First Year of Transition

• Text Boxes

• 1. Tax Assignments and Tax Autonomy at the Intermediate Level of Subnational Governments in Selected EU Countries

• 2. Internal Stability Pacts in Selected EU Countries

• Appendix

• The Main Regional Taxes

• References

• IV. Sources of Data and General Information on the World Wide Web