Template-Type: ReDIF-Article 1.0
Author-Name: Pierto A. Vagliasindi
Author-Email:
Author-Workplace-Name: Università di Parma - Dipartimento di Diritto, Economia e Finanza Internazionale
Title: The Theory of Public Debt in the Italian Tradition. Two Possibile Neutrality Theorems
Abstract:This work considers the Italian contribution to the theory of public debt and the taxation of its interest
at the end of the nineteenth century and the beginning of the twentieth century. This is a
very interesting period since Italian economists examine the economic aspect of the State policies
in a general equilibrium set-up with a careful welfare analysis, taking into account the difficulties
of measurement and applied research. A new review of the Italian approach is motivated
by the growing literature on the Ricardian equivalence and by new policy recommendations, related
to the exemption of interests on public debt from taxation, at times derived from Einaudi’s
theory of the “transfer-payment” in the public balance sheet. We start from the origin of public
debt contributions in 1850 considering the contribution of Ferrara and Messedaglia, subsequently
extended by the work of Ricca Salerno (1879), Loria (1884), Pantaleoni (1891), De Viti de Marco
(1893) and critically reviewed by the work of Griziotti (1917), Borgatta (1918) and Einaudi (1913).
After providing an overview of the Italian tradition of public finance, we show how Pantaleoni
and De Viti correctly identify the theoretical assumptions behind the Ricardian equivalence between
public debt and taxation, highlighting their points of strength and weakness. In particular,De Viti argues in favour of the use of public debt versus taxation, anticipates recent public choice
models and theoretical and empirical contributions raising concerns on the credibility of the
State’s commitment and the non monetary risks associated to the public debt. Moreover, De Viti
examines the implication of the taxation of public debt interest, in contrast to Einaudi and the
current scholars believing to the theory of the irrelevance or negative influence of the tax rate on
the interest of public debt. His comprehensive model provides strong support to policy recommendations
in favour of taxing the interest of public debt, including it in a comprehensive income
tax.
Classification-JEL: B1, E62, H31
Keywords: Public debt; Ricardian equivalence; Italian public finance tradition
Journal: Il Pensiero Economico Italiano
Pages: 199-219
Volume: 11
Issue: 1
Year: 2003
File-URL: http://www.libraweb.net/articoli.php?chiave=200306301&rivista=63
Handle: RePEc:pei:journl:v:11:y:2003:1:9:p:199-219