This paper provides estimates of the redistribution and risk sharing across regional jurisdictions accomplished by the public sector in Italy. In this analysis the multi-level structure of the Italian government and the financial relations which link the different layers of government are explicitly considered. Using panel data for the period 1996-2002 we find that public policies in Italy significantly reduce differences in per-capita GDP across regions. However public budget, far from providing insurance against idiosyncratic shocks, greatly emphasizes income fluctuations across regions.
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