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Does Fiscal Discipline Towards Subnational Governments Affect Citizens' Well‐Being? Evidence On Health

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  • Massimiliano Piacenza
  • Gilberto Turati

Abstract

This paper aims to assess the impact on citizens' well‐being of fiscal discipline imposed by the central government on subnational governments. Because healthcare 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 government expectations of future deficit bailouts from the central government. We then study how these bailout expectations affect the expenditure for healthcare policies carried out by decentralized governments. To investigate this issue, we separate efficient health spending from inefficiencies by estimating an input requirement frontier. This allows 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 not affecting citizens' health. However, they do appear to exert a remarkable impact on excess spending. Copyright © 2013 John Wiley & Sons, Ltd.

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  • Massimiliano Piacenza & Gilberto Turati, 2014. "Does Fiscal Discipline Towards Subnational Governments Affect Citizens' Well‐Being? Evidence On Health," Health Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 199-224, February.
    • Handle: RePEc:wly:hlthec:v:23:y:2014:i:2:p:199-224
    DOI: 10.1002/hec.2910
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    5. Di Novi, Cinzia & Piacenza, Massimiliano & Robone, Silvana & Turati, Gilberto, 2019. "Does fiscal decentralization affect regional disparities in health? Quasi-experimental evidence from Italy," Regional Science and Urban Economics, Elsevier, vol. 78(C).
    6. bucci, valeria & ferrara, giancarlo & resce, giuliano, 2022. "Fiscal decentralization and efficiency: empirical evidence from Italian municipalities," MPRA Paper 111515, University Library of Munich, Germany.
    7. Marenzi, Anna & Rizzi, Dino & Zanette, Michele & Zantomio, Francesca, 2023. "Regional institutional quality and territorial equity in LTC provision," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    8. Maura Francese & Massimiliano Piacenza & Marzia Romanelli & Gilberto Turati, 2011. "Understanding Inappropriateness in Health Care: The Role of Supply Structure, Pricing Policies and Political Institutions in Caesarean Deliveries," ERSA conference papers ersa11p1439, European Regional Science Association.
    9. Lorenzo Cappellari & Anna De Paoli & Gilberto Turati, 2016. "Do Market Incentives for Hospitals Affect Health and Service Utilization? Evidence from PPS-DRG Tariffs in Italian Regions," CESifo Working Paper Series 5804, CESifo.
    10. Berger, Michael & Sommersguter-Reichmann, Margit & Czypionka, Thomas, 2020. "Determinants of soft budget constraints: How public debt affects hospital performance in Austria," Social Science & Medicine, Elsevier, vol. 249(C).
    11. Marenzi, A.; & Rizzi, D.; & Zanette, M.; & Zantomio, F.;, 2022. "Regional Institutional Quality and Territorial Equity in LTC Provision," Health, Econometrics and Data Group (HEDG) Working Papers 22/27, HEDG, c/o Department of Economics, University of York.
    12. Joan Costa-Font & Gilberto Turati, 2018. "Regional healthcare decentralization in unitary states: equal spending, equal satisfaction?," Regional Studies, Taylor & Francis Journals, vol. 52(7), pages 974-985, July.
    13. Massimo Bordignon & Silvia Coretti & Massimiliano Piacenza & Gilberto Turati, 2020. "Hardening subnational budget constraints via administrative subordination: The Italian experience of recovery plans in regional health services," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1378-1399, November.
    14. Signorelli, C. & Odone, A. & Oradini-Alacreu, A. & Pelissero, G., 2020. "Universal Health Coverage in Italy: lights and shades of the Italian National Health Service which celebrated its 40th anniversary," Health Policy, Elsevier, vol. 124(1), pages 69-74.
    15. Rosta, Miklós, 2015. "Introduction of soft budget constraint to analyze public administration reforms. Some evidence from the Hungarian public administration reform," MPRA Paper 68473, University Library of Munich, Germany.
    16. Berger, Michael & Sommersguter-Reichmann, Margit & Czypionka, Thomas, 2020. "Determinants of soft budget constraints: how public debt affects hospital performance in Austria," LSE Research Online Documents on Economics 116865, London School of Economics and Political Science, LSE Library.
    17. Bettin, Giulia & Sacchi, Agnese, 2020. "Health spending in Italy: The impact of immigrants," European Journal of Political Economy, Elsevier, vol. 65(C).
    18. Dino Rizzi & Michele Zanette, 2021. "Potential efficiency gains and expenditure savings in the Italian Regional Healthcare Systems," Politica economica, Società editrice il Mulino, issue 2, pages 187-214.
    19. Ryota Nakatani & Qianqian Zhang & Isaura Garcia Valdes, 2024. "Health Expenditure Decentralization and Health Outcomes: The Importance of Governance," Publius: The Journal of Federalism, CSF Associates Inc., vol. 54(1), pages 59-87.
    20. Cappellari, Lorenzo & De Paoli, Anna & Turati, Gilberto, 2014. "Do Market Incentives in the Hospital Industry Affect Subjective Health Perceptions? Evidence from the Italian PPS-DRG Reform," IZA Discussion Papers 8636, Institute of Labor Economics (IZA).
    21. Lorenzo Cappellari & Anna De Paoli & Gilberto Turati, 2016. "Do market incentives for hospitals affect health and service utilization?: evidence from prospective pay system–diagnosis-related groups tariffs in Italian regions," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 179(4), pages 885-905, October.
    22. Alessandra Cepparulo & Luisa Giuriato, 2022. "The residential healthcare for the elderly in Italy: some considerations for post-COVID-19 policies," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(4), pages 671-685, June.
    23. Antonio Nuzzo & Flavia Carle & Eugenio Anessi Pessina, 2018. "Processo di decentramento del SSN ed evoluzione dell?equit? interregionale nell?assistenza sanitaria nel periodo 2001-2012," MECOSAN, FrancoAngeli Editore, vol. 2018(108), pages 9-34.
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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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