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Does Fiscal Discipline towards Sub-national Governments Affect Citizens' Well-being? Evidence on Health

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  • Massimiliano Piacenza

    (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Gilberto Turati

    (Department of Economics and Public Finance "G. Prato", University of Torino)

Abstract

This paper aims at assessing the impact of fiscal discipline towards sub-national governments on citizens' well-being. We model fiscal discipline by considering the expectations of deficit bailouts by Central Government, and focus on a particular dimension of well-being, namely health outcomes at the regional level. We study then how bailout expectations affect the expenditure for health care policies carried out by Regional Governments: in the presence of opportunistic behaviours by local governments - induced by soft budget constraints - bailout expectations should affect only spending inefficiency, and should not have any real effects on citizens' health. To investigate this issue, we model the efficient use of public resources for health care delivery as an input requirement frontier, and assess the effects of bailout expectations on both the structural component of health spending and its deviations from the best practice. The evidence from a sample of 15 Italian Regions observed from 1993 to 2006 highlights that bailout expectations do not significantly influence the position of the frontier, thus do not affect citizens' health. However, they appear to exert a remarkable impact on excess spending.

Suggested Citation

  • Massimiliano Piacenza & Gilberto Turati, 2010. "Does Fiscal Discipline towards Sub-national Governments Affect Citizens' Well-being? Evidence on Health," Working papers 12, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    • Handle: RePEc:tur:wpaper:12
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    More about this item

    Keywords

    Intergovernmental relationships; Soft budget constraint; Bailout expectations; Health care policy; Spending efficiency;
    All these keywords.

    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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