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 originale | Inglese |
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pagine (da-a) | 535-547 |
Numero di pagine | 13 |
Rivista | International Tax and Public Finance |
Volume | 10 |
Numero di pubblicazione | 5 |
DOI | |
Stato di pubblicazione | Pubblicato - set 2003 |