Flypaper effect and sluggishness: Evidence from regional health expenditure in Italy

Rosella Levaggi, Roberto Zanola

Risultato della ricerca: Contributo su rivistaArticolo in rivistapeer review

Abstract

In Italy, public expenditure reduction is achieved through a revision of social security and health care programs. In particular, public health expenditure control has been implemented through a reform that imposes more stringent budget rules to local governments and a considerable reduction in grants-in-aid from the central government. This paper investigates empirically whether the response to this decrease in categorical lump-sum grants from the central to local governments results in an asymmetric response to intergovernmental grants. Hard budget and soft budget constraint hypotheses are estimated by using a sample of cross-sectional and time observations covering the 20 Italian regions over the period 1989-1993. The main finding is the existence of a standard and a super flypaper effect in both models. The introduction of the soft-budget constraint hypothesis results in a stronger effect of grants and a lower response of own resources which shows that local governments prefer to incur some deficit instead of reducing health care expenditure.

Lingua originaleInglese
pagine (da-a)535-547
Numero di pagine13
RivistaInternational Tax and Public Finance
Volume10
Numero di pubblicazione5
DOI
Stato di pubblicazionePubblicato - set 2003

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