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Bailing Out Expectations and Health Expenditure in Italy

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  • Massimo Bordignon
  • Gilberto Turati

Abstract

In this paper we propose a simple model of bailing out that closely describes the intergovernmental relationships between the Central government and the regional governments in the Italian public health care sector. The theoretical model suggests that bail out expectations by regions can be thought as the missing variable emphasised by Culyer (1988) in empirical models explaining health expenditure. We test this prediction by using data on regional health expenditure during the years 1990-1999. We show that financing by regions is influenced by political variables that capture changes in bail out expectations. This “expected” funding has a positive relationship with expenditure, even when Central government decreased financing to regions. Moreover, the “alignment effect” shows that “friendly” regional governments receive more money and support Central government by reducing expenditure.

Suggested Citation

  • Massimo Bordignon & Gilberto Turati, 2003. "Bailing Out Expectations and Health Expenditure in Italy," CESifo Working Paper Series 1026, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1026
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1026.pdf
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    References listed on IDEAS

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    1. Roberto Cellini & Giacomo Pignataro & Ilde Rizzo, 2000. "Competition and Efficiency in Health Care: An Analysis of the Italian Case," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 503-519, August.
    2. Gerdtham, Ulf-G. & Jonsson, Bengt, 2000. "International comparisons of health expenditure: Theory, data and econometric analysis," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 1, pages 11-53 Elsevier.
    3. Margherita Giannoni & Theodore Hitiris, "undated". "The Regional Impact of Health Care Expenditure: the Case of Italy," Discussion Papers 99/20, Department of Economics, University of York.
    4. Pedro Pita Barros, 1998. "The black box of health care expenditure growth determinants," Health Economics, John Wiley & Sons, Ltd., vol. 7(6), pages 533-544.
    5. Gerdtham, Ulf-G. & Lothgren, Mickael, 2000. "On stationarity and cointegration of international health expenditure and GDP," Journal of Health Economics, Elsevier, vol. 19(4), pages 461-475, July.
    6. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    7. Helmut Herwartz & Bernd Theilen, 2003. "The determinants of health care expenditure: testing pooling restrictions in small samples," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 113-124.
    8. Margherita Giannoni & Theodore Hitiris, 2002. "The regional impact of health care expenditure: the case of Italy," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1829-1836.
    9. Eric S. Maskin, 1999. "Recent Theoretical Work on the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 421-425, May.
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    Keywords

    health care expenditure; intergovernmental relationships;

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