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Does fiscal discipline towards sub-national governments affect citizens’ well-being? evidence on health

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  • Massimiliano Piacenza

    ()
    (University of Torino & HERMES)

  • Gilberto Turati

    ()
    (University of Torino & HERMES)

Abstract

This paper aims at assessing the impact on citizens’ well-being of fiscal discipline imposed by Central Government to sub-national governments. Since health care policies involve strategic interactions between different layers of governments in many different countries, we focus on a particular dimension of well-being, namely citizens’ health. We model fiscal discipline by considering sub-national governments expectations of future deficit bailouts from the Central Government. We then study how these bailout expectations affect the expenditure for health care policies carried out by decentralized governments. To investigate this issue, we separate efficient health spending from inefficiencies by estimating an input requirement frontier. This allow us to assess the effects of bailout expectations on both the structural component of health expenditure and its deviations from the ‘best practice’. The evidence from the 15 Italian Ordinary Statute Regions (observed from 1993 to 2006) points out that bailout expectations do not significantly influence the position of the frontier, thus do not affect citizens’ health. However, they appear to exert a remarkable impact on excess spending.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/56.

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Length: 46 pages
Date of creation: 2010
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Handle: RePEc:ieb:wpaper:2011/1/doc2010-56

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Keywords: Intergovernmental relationships; soft budget constraint; bailout expectations; health care policy; spending efficiency.;

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Cited by:
  1. Maura Francese & Massimiliano Piacenza & Marzia Romanelli & Gilberto Turati, 2012. "Understanding Inappropriateness in Health Care. The Role of Supply Structure, Pricing Policies and Political Institutions in Caesarean Deliveries," Working papers, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino 001, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

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