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Bailing Out Expectations and Health Expenditure in Italy

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Author Info

  • Massimo Bordignon
  • Gilberto Turati

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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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1026.

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

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Keywords: health care expenditure; intergovernmental relationships;

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References

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  1. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, Elsevier, vol. 27(2), pages 253-279, August.
  2. Margherita Giannoni & Theodore Hitiris, 2002. "The regional impact of health care expenditure: the case of Italy," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 34(14), pages 1829-1836.
  3. Pedro Pita Barros, 1998. "The black box of health care expenditure growth determinants," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 7(6), pages 533-544.
  4. Gerdtham, Ulf-G. & Löthgren, Mickael, 1998. "On stationarity and cointegration of international health expenditure and GDP," Working Paper Series in Economics and Finance, Stockholm School of Economics 232, Stockholm School of Economics, revised 29 Jan 1999.
  5. Roberto Cellini & Giacomo Pignataro & Ilde Rizzo, 2000. "Competition and Efficiency in Health Care: An Analysis of the Italian Case," International Tax and Public Finance, Springer, Springer, vol. 7(4), pages 503-519, August.
  6. Herwartz, Helmut & Theilen, Bernd, 2000. "The determinants of health care expenditure: Testing pooling restrictions in small samples," SFB 373 Discussion Papers, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2000,78, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  7. Margherita Giannoni & Theodore Hitiris, . "The Regional Impact of Health Care Expenditure: the Case of Italy," Discussion Papers, Department of Economics, University of York 99/20, Department of Economics, University of York.
  8. Gerdtham, Ulf-G. & Jonsson, Bengt, 2000. "International comparisons of health expenditure: Theory, data and econometric analysis," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 1, pages 11-53 Elsevier.
  9. Eric S. Maskin, 1999. "Recent Theoretical Work on the Soft Budget Constraint," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 421-425, May.
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Citations

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Cited by:
  1. János Kornai, 2009. "The soft budget constraint syndrome in the hospital sector," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 9(2), pages 117-135, June.
  2. 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, University of Verona, Department of Economics 12, University of Verona, Department of Economics.
  3. Kornai, János, 2008. "A puha költségvetési korlát szindrómája a kórházi szektorban
    [The soft budget constraint syndrome in the hospital sector]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1037-1056.
  4. Pilar Sorribas-Navarro, 2006. "(When) Are Intergovernmental Transfers Used to Bail Out Regional Governments? Evidence from Spain 1986-2001," Working Papers 2006/7, Institut d'Economia de Barcelona (IEB).
  5. Karima Saleh, 2012. "World Bank study : A Health Sector in Transition to Universal Coverage in Ghana," World Bank Other Operational Studies 2728, The World Bank.
  6. Peter Claeys & Raúl Ramos & Jordi Suriñach, 2007. "Fiscal sustainability across government tiers: an assessment of soft budget constraints," IREA Working Papers, University of Barcelona, Research Institute of Applied Economics 200714, University of Barcelona, Research Institute of Applied Economics, revised Jul 2007.
  7. Lucarelli, Stefano, 2008. "Cicli politici elettorali ed evoluzione del finanziamento della sanità italiana: uno studio di lungo periodo
    [Political Electoral Cycles and Evolution of Italian Health Care System Financing: a Lo
    ," MPRA Paper 28009, University Library of Munich, Germany.
  8. Bordignon, Massimo & Turati, Gilberto, 2009. "Bailing out expectations and public health expenditure," Journal of Health Economics, Elsevier, Elsevier, vol. 28(2), pages 305-321, March.
  9. Bernard F. Couttolenc, 2012. "Decentralization and Governance in the Ghana Health Sector," World Bank Publications, The World Bank, number 9376, August.

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