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

Author Info

  • 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.

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File URL: http://web.econ.unito.it/prato/papers/n12.pdf
File Function: First version, 2010
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Paper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 12.

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Length: 41 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:tur:wpaper:12
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Keywords: Intergovernmental relationships; Soft budget constraint; Bailout expectations; Health care policy; Spending efficiency;

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Find related papers by 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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Cited by:

  1. 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.
  2. 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 for the Study of Labor (IZA).

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