Beyond the myth of suffocating centralization: from legal intent to evidence in early Italy

Abstract

This paper re-examines the widespread claim that the Italian Municipal Law of 1865 effectively suppressed local autonomy. Rather than relying on the statute’s formal design or on later legal commentary, the analysis turns to the actual behaviour of municipalities in the decades after unification. Regional fiscal data from 1866 to 1911 show that local governments retained substantial discretion, adopted markedly different tax and expenditure strategies, and followed trajectories that diverged sharply across the country. These patterns speak directly to the debate between law and economics and public choice. While the legal interpretation stresses the centralising intent of the Law, our evidence suggests that local outcomes were shaped not only by the formal institutional framework but also by differences in local incentives and fiscal preferences. The paper shows that the formal structure of a law does not necessarily determine its practical effects, and that institutional analysis gains much from combining legal and political-economy perspectives.