We use a “natural experiment”, the fiscal adjustment of Italy in the 1990s to meet the Maastricht criteria, to test a simple model of soft budget constraint that closely resembles the intergovernmental relationships in the Italian public health care sector. We show that the link between the ex-ante financing by the Central government and the health expenditure by regions was stronger when regional expectations of future bailing outs were presumably lower. Confirming previous research, we also prove that more fiscally autonomous regions were more financially responsible and that a political “alignment” effect was present, with “friendly” regional governments controlling more expenditure than unfriendly ones. Our results suggest that, at least in Italy, bailing out expectations by regions may be the missing variable emphasised by [Culyer A.J., 1988. Health care expenditures in Canada: Myth and reality. Canadian Tax Papers, 82] for empirical models explaining health expenditure. Our results also raise someworries about the outcome of the current decentralization process in Europe.

Bordignon, M., Turati, G., Bailing out expectations and public health expenditure, <<JOURNAL OF HEALTH ECONOMICS>>, 2009; 28 (2): 305-321. [doi:10.1016/j.jhealeco.2008.12.008] [http://hdl.handle.net/10807/3352]

Bailing out expectations and public health expenditure

Bordignon, Massimo;Turati, Gilberto
2009

Abstract

We use a “natural experiment”, the fiscal adjustment of Italy in the 1990s to meet the Maastricht criteria, to test a simple model of soft budget constraint that closely resembles the intergovernmental relationships in the Italian public health care sector. We show that the link between the ex-ante financing by the Central government and the health expenditure by regions was stronger when regional expectations of future bailing outs were presumably lower. Confirming previous research, we also prove that more fiscally autonomous regions were more financially responsible and that a political “alignment” effect was present, with “friendly” regional governments controlling more expenditure than unfriendly ones. Our results suggest that, at least in Italy, bailing out expectations by regions may be the missing variable emphasised by [Culyer A.J., 1988. Health care expenditures in Canada: Myth and reality. Canadian Tax Papers, 82] for empirical models explaining health expenditure. Our results also raise someworries about the outcome of the current decentralization process in Europe.
2009
Inglese
Bordignon, M., Turati, G., Bailing out expectations and public health expenditure, <<JOURNAL OF HEALTH ECONOMICS>>, 2009; 28 (2): 305-321. [doi:10.1016/j.jhealeco.2008.12.008] [http://hdl.handle.net/10807/3352]
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/3352
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 95
  • ???jsp.display-item.citation.isi??? 85
social impact