The Flypaper Effect: Evidence from the Italian National Health System
AbstractPublic expenditure reduction in Italy is achieved through a revision of social security and health care programmes. In particular, public health expenditure control has been implemented through a reform that imposes more stringent budget rules at local level and a considerable reduction in the grants-in-aid from central government. The response to a decrease in categorical lump-sum grants from the central to local governments might result in an asymmetrical response to intergovernmental grants: local spending is highly responsive to increases in grants, but it is relatively insensitive to grants reduction [Stine, 1994; Gramkhar and Oates, 1996]. In our paper we have estimated this hypothesis using a sample of cross-sectional and time- observations covering the 20 Italian regions over the period 1989-1993. Two different models have been estimated based on different budget balance rules. The empirical results of our model show the existence of a standard and a super flypaper effect in both models. The introduction of the soft-budget constraint hypothesis results in a stronger effect of grants and a lower response of own resources which shows that before reducing expenditure regional governments prefer to incur some deficit.
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Bibliographic InfoPaper provided by Institute of Public Policy and Public Choice - POLIS in its series POLIS Working Papers with number 10.
Length: 24 pages
Date of creation: Jan 2000
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flypaper effect; health care; Italy; soft-budget constraint;
Find related papers by JEL classification:
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-28 (All new papers)
- NEP-HEA-2000-02-28 (Health Economics)
- NEP-PUB-2000-02-28 (Public Finance)
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