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- Title
Flypaper Effect and Sluggishness: Evidence from Regional Health Expenditure in Italy.
- Authors
Levaggi, Rosella; Zanola, Roberto
- Abstract
In Italy, public expenditure reduction is achieved through a revision of social security and health care programs. In particular, public health expenditure control has been implemented through a reform that imposes more stringent budget rules to local governments and a considerable reduction in grants-in-aid from the central government. This paper investigates empirically whether the response to this decrease in categorical lump-sum grants from the central to local governments results in an asymmetric response to intergovernmental grants. Hard budget and soft budget constraint hypotheses are estimated by using a sample of cross-sectional and time observations covering the 20 Italian regions over the period 1989-1993. The main finding is the existence of a standard and a super flypaper effect in both models. The introduction of the soft-budget constraint hypothesis results in a stronger effect of grants and a lower response of own resources which shows that local governments prefer to incur some deficit instead of reducing health care expenditure.
- Subjects
ITALY; PUBLIC spending; SOCIAL security; MEDICAL care costs; FEDERAL government; EMPIRICAL research
- Publication
International Tax & Public Finance, 2003, Vol 10, Issue 5, p535
- ISSN
0927-5940
- Publication type
Article
- DOI
10.1023/A:1026118222901