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The decline in municipal investments between Domestic Stability Pact and lack of financial resources

Author

Listed:
  • Paolo Chiades

    (Bank of Italy)

  • Vanni Mengotto

    (Bank of Italy)

Abstract

This paper analyzes the decline in Italian municipal investments that began in the middle of the last decade. The analysis shows that, organizational methods for service provision budgetary financial conditions being equal, investments declined more sharply in the municipalities subject to the Domestic Stability Pact than in those which were exempted. The Pact effects have been relatively stronger for those municipalities in better financial conditions, that would have been able to finance investments with their own resources. In more recent years, the relaxation of the constraints and the introduction of regional pacts have alleviated difficulties in settling expenditure arrears. The Pact has helped to achieve the main goal of the legislator, i.e. to keep the deficit under control. It has also provided a stimulus for local governments to be more rigorous in drafting their budgets, leading to a closer correlation between the amounts committed and those actually spent, in line with the provisions of the new accounting system which will come into force in 2015.

Suggested Citation

  • Paolo Chiades & Vanni Mengotto, 2013. "The decline in municipal investments between Domestic Stability Pact and lack of financial resources," Questioni di Economia e Finanza (Occasional Papers) 210, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_210_13
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2013-0210/QEF_210.pdf
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    Citations

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    Cited by:

    1. Venturini, Fiorenza, 2020. "The unintended composition effect of the subnational government fiscal rules: The case of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 63(C).
    2. Paolo di Caro & Paolo Lorenzo Ferrara & Pasquale Giacobbe, 2023. "Percezione del fabbisogno di beni pubblici e sviluppo locale: un caso studio per il quartiere di San Cristoforo nella periferia sud di Catania," Regional Economy, , vol. 7(Q1), pages 35-44.
    3. Fiorenza Venturini, 2018. "The Unintended Composition Effect of the Subnational Government Fiscal Rules: The Case of Italian Municipalities," Working papers 70, Società Italiana di Economia Pubblica.
    4. Mancini, Anna Laura & Tommasino, Pietro, 2023. "Fiscal rules and the reliability of public investment plans: Evidence from local governments," European Journal of Political Economy, Elsevier, vol. 79(C).

    More about this item

    Keywords

    Domestic Stability Pact; municipalities; investments;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • 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

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