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Problems of Soft Budget Constraints in Intergovernmental Relationships: The Case of Italy

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Massimo Bordignon

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Abstract

Problems of `soft budget` constraints in intergovernmental relationships are currently at the frontier of research in local public economics. This paper reviews the Italian experience in the field, starting from the mid-1970s up to the present period, compares it with that of other countries, and uses it to comment upon the state of the literature. The paper argues that the soft budget constraint problem has been a rampant one in Italian local public finance, generating efficiency losses, lack of political accountability and undermining the soundness of public finances. The paper inquires into the causes and possible solutions to the problem, and in particular describes and comments upon the decentralization process of the 1990s. Finally, the Italian debate on fiscal federalism of the 1990s is also reviewed, arguing that some of the suggestions of this debate may be of interest more generally.

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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 3099.

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Date of creation: Nov 2000
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Handle: RePEc:idb:wpaper:3099

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  1. Kornai, Janos, 1986. "The Soft Budget Constraint," Kyklos, Blackwell Publishing, vol. 39(1), pages 3-30.
  2. Gordon, Roger H, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 567-86, November. [Downloadable!] (restricted)
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  3. Bordignon, Massimo & Manasse, Paolo & Tabellini, Guido, 1996. "Optimal Regional Redistribution Under Asymmetric Information," CEPR Discussion Papers 1437, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Dewatripont, M & Maskin, E, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 541-55, October. [Downloadable!] (restricted)
  5. Massimo Bordignon & Enrico Minelli, . "Rules transparency and political accountability," Working Papers 147, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  6. Massimo Bordignon & Alberto Zanardi, 1997. "Tax Evasion in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(3-4), pages 169-210, December.
  7. Massimo Bordignon & Paolo Manasse & Guido Tabellini, . "Come Fare la Perequazione Regionale in Italia? Parte I," Working Papers 107, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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(explanations, 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. Julia Darby & Anton Muscatelli & Graeme Roy, 2006. "Asymmetries in the Responses of Sub-Central Governments to Changes in Grants: Evidence From an Event Study," ERSA conference papers ersa06p508, European Regional Science Association. [Downloadable!]
  2. Ernesto Crivelli & Klaas Staal, 2006. "Size and Soft Budget Constraints," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
    • Ernesto Crivelli & Klaas Staal, 2006. "Size and Soft Budget Constraints," Working Papers 2006-13, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
    • Ernesto Crivelli & Klaas Staal, 2006. "Size and soft budget constraints," Discussion Papers 172, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  3. Jürgen Von Hagen & Massimo Bordignon & Bhajan S. Grewal & Per Peterson & Helmut Seitz & Matz Dahlberg, 2000. "Subnational Government Bailouts in OECD Countries: Four Case Studies," RES Working Papers 3100, Inter-American Development Bank, Research Department. [Downloadable!]
  4. Julia Darby & Anton Muscatelli & Graeme Roy, 2004. "Fiscal Federalism, Fiscal Consolidations and Cuts in Central Government Grants: Evidence from an Event Study," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. 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)
  6. Maria Flavia Ambrosanio & Massimo Bordignon & Floriana Cerniglia, 2008. "Constitutional reforms, fiscal decentralization and regional fiscal flows in Italy," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0084, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  7. Stefano Colombo, 2008. "Discriminatory prices, endogenous locations and the Prisoner Dilemma problem," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0079, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  8. Luca Colombo & Herbert Dawid & Kordian Kabus, 2007. "When do Thick Venture Capital Markets Foster Innovation? An Evolutionary Analysis," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0074, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  9. Julia Darby & Anton Muscatelli & Graeme Roy, 2002. "Fiscal federalism and Fiscal Autonomy: Lessons for the UK from other Industrialised Countries," Working Papers 2002_12, Department of Economics, University of Glasgow. [Downloadable!]
  10. Angelo Baglioni & Andrea Monticini, 2008. "The intraday interest rate under a liquidity crisis: the case of August 2007," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0083, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  11. Ernesto Crivelli & Klaas Staal, 2008. "Size, Spillovers and Soft Budget Constraints," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_17, Max Planck Institute for Research on Collective Goods. [Downloadable!]
  12. Jürgen von Hagen, 2005. "Political Economy of Fiscal Institutions," Discussion Papers 149, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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