Divided Nation: The North-South Cleavage in Italian Tax Compliance

Abstract

It is well known that tax compliance is low in Italy, and lower in the South than in the North. Many scholars have examined Italian taxpayer behavior, mainly using experiments and surveys. However, little attention has been given to the historical circumstances that have shaped divergent taxpayer behavior by Northern and Southern Italians. This article uses historical data from Italian unification through the Second Republic to assess the effects of Italy’s major formal institutions (the church, state, and political parties) and informal institutions (clientelism) on Italian tax behavior. It argues that nineteenth-century unification had significant repercussions on the two most important institutions in Italy—the Catholic Church and the state—and hence led to two different kinds of clientelism. Since Southern clientelism favored private interests and Northern clientelism led to the construction of public institutions, this created two different tax compliance environments.