Fiscal decentralization and spillover effects of local government public spending: the case of Italy. Regional Studies. This paper investigates the presence of spatial interdependencies in the regional public expenditure decision process and the impact of fiscal decentralization on its determinants. The analysis refers to the constitutional reform concluded in Italy in 2001 that redefined the legislative powers of the regions and their sectoral competence. The results highlight the opportunistic behaviour of regional governments in sectors where they can benefit from neighbours’ public expenditure spillovers. Other findings comprise the presence of congestion and mobility effects, a shift in demand to the private sector, except for education, and the mobility of individuals towards richer regions.