The Response of Taxpayer Compliance to the Large Shock of Italian Unification∗ Antonio Acconcia Marcello D’Amato Riccardo Martina Marisa Ratto October 5, 2020 Abstract The institution of Italy as a unified state, in 1861, was an unexpected event to many. The associated shocks to the tax burden, raised differently across pre-unitary states, triggered on impact large spatial variability in compliance. A fair amount of that variability settled in the following decades; current rates of compliance are, how- ever, still correlated with the unification shocks. The decentralized system of tax enforcement established after the political integration allows to explain the lack of full convergence in compliance. Keywords: State formation, tax shock, noncompliance, decentralized enforcement. JEL: D62, D81, H26, K41, K42. ∗We would like to thank seminar participants at the Journees´ Louis-Andre´ Gerard-Varet´ (Aix-en- Provence, 2016), the 75th Annual Congress of the International Institute of Public Finance (Glasgow, 2019), the University of Torino, the University of Verona. We also thank Giuseppe Bertola, Vittorio Daniele, Domenicantonio Fausto, Massimo Marrelli, Massimo Morelli, Maria Pia Nastri, and Pasquale Pistone for useful discussions and suggestions. We are especially grateful to Stefano Pisani (Agenzia delle Entrate) for kindly providing us with the data and for useful comments on a previous version. Acconcia and Martina gratefully acknowledge support of the PRIN 2017-Public Policy Evaluation in the Wake of the Great Reces- sion; Project 2017RHFXK4. Antonio Acconcia: Department of Economics and Statistics, University of Naples Federico II and CSEF (email:
[email protected]); Marcello D’Amato: Department of Law, University of Naples Suor Or- sola Benincasa and CSEF (email:
[email protected]); Riccardo Martina: Department of Eco- nomics and Statistics, University of Naples Federico II and CSEF (email:
[email protected]); Marisa Ratto: Department of Economics, Universite´ Paris-Dauphine (email: maria
[email protected]).