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Bailing Out Expectations and Health Expenditure in Italy

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Author Info
Bordignon, Massimo
Turati, Gilberto

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Abstract

In this paper we propose a simple model of bailing out that closely describes the intergovernmental relationships between the Central government and the regional governments in the Italian public health care sector. The theoretical model suggests that bail out expectations by regions can be thought as the missing variable emphasised by Culyer (1988) in empirical models explaining health expenditure. We test this prediction by using data on regional health expenditure during the years 1990-1999. We show that financing by regions is influenced by political variables that capture changes in bail out expectations. This "expected" funding has a positive relationship with expenditure, even when Central government decreased financing to regions. Moreover, the "alignment effect" shows that "friendly" regional governments receive more money and support Central government by reducing expenditure.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1026.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1026

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Related research
Keywords: health care expenditure; intergovernmental relationships;

Find related papers by JEL classification:
H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August. [Downloadable!] (restricted)
    Other versions:
  2. Pedro Pita Barros, 1998. "The black box of health care expenditure growth determinants," Health Economics, John Wiley & Sons, Ltd., vol. 7(6), pages 533-544.
  3. Giannoni, Margherita & Hitiris, Theodore, 2002. "The Regional Impact of Health Care Expenditure: The Case of Italy," Applied Economics, Taylor and Francis Journals, vol. 34(14), pages 1829-36, September. [Downloadable!] (restricted)
  4. Eric S. Maskin, 1999. "Recent Theoretical Work on the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 421-425, May. [Downloadable!] (restricted)
  5. Helmut Herwartz & Bernd Theilen, 2003. "The determinants of health care expenditure: testing pooling restrictions in small samples," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 113-124. [Downloadable!]
  6. Gerdtham, Ulf-G. & Lothgren, Mickael, 2000. "On stationarity and cointegration of international health expenditure and GDP," Journal of Health Economics, Elsevier, vol. 19(4), pages 461-475, July. [Downloadable!] (restricted)
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Cited by:
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  1. Gian Paolo Barbetta & Gilberto Turati & Angelo Zago, 2004. "Behavioral Differences Between Public and Private Not-For-Profit Hospitals in the Italian National Health Service," Working Papers 12, Università di Verona, Dipartimento di Scienze economiche. [Downloadable!]
    Other versions:
  2. János Kornai, 2009. "The soft budget constraint syndrome in the hospital sector," International Journal of Health Care Finance and Economics, Springer, vol. 9(2), pages 117-135, June. [Downloadable!] (restricted)
  3. Peter Claeys & Raúl Ramos & Jordi Suriñach, 2007. "Fiscal sustainability across government tiers: an assessment of soft budget constraints," IREA Working Papers 200714, University of Barcelona, Research Institute of Applied Economics, revised Jul 2007. [Downloadable!]
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