Causes and Consequences of Bailing out Expectations of Subcentral Governments: Theory and Evidence from the Italian Regions
AbstractThis paper examines the strategic interactions among the central and a subcentral government where incomplete information forces both to form expectations about the other’s behaviour, especially the probability that the central government will bail out the local one. Various determinants and outcomes of the strategic interaction are explored. The model generates empirical restrictions about the central government’s transfer decisions and the lower government’s spending behaviour. These restrictions are tested on a sample of 20 Italian Regions. Data show that bailing out expectations are a quantitatively important component of local government spending.
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Bibliographic InfoPaper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201128.
Date of creation: Oct 2011
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Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France
Find related papers by JEL classification:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-28 (All new papers)
- NEP-GEO-2011-11-28 (Economic Geography)
- NEP-URE-2011-11-28 (Urban & Real Estate Economics)
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