IDEAS home Printed from https://ideas.repec.org/p/idb/wpaper/3099.html
   My bibliography  Save this paper

Problems of Soft Budget Constraints in Intergovernmental Relationships: The Case of Italy

Author

Listed:
  • Massimo Bordignon

Abstract

Problems of `soft budget` constraints in intergovernmental relationships are currently at the frontier of research in local public economics. This paper reviews the Italian experience in the field, starting from the mid-1970s up to the present period, compares it with that of other countries, and uses it to comment upon the state of the literature. The paper argues that the soft budget constraint problem has been a rampant one in Italian local public finance, generating efficiency losses, lack of political accountability and undermining the soundness of public finances. The paper inquires into the causes and possible solutions to the problem, and in particular describes and comments upon the decentralization process of the 1990s. Finally, the Italian debate on fiscal federalism of the 1990s is also reviewed, arguing that some of the suggestions of this debate may be of interest more generally.

Suggested Citation

  • Massimo Bordignon, 2000. "Problems of Soft Budget Constraints in Intergovernmental Relationships: The Case of Italy," Research Department Publications 3099, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:3099
    as

    Download full text from publisher

    File URL: http://www.iadb.org/research/pub_hits.cfm?pub_id=R-398&pub_file_name=pubR-398.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    2. Ernesto Stein, 1999. "Fiscal Decentralization and Government Size in Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 2, pages 357-391, November.
    3. M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 541-555.
    4. Ernesto Stein, 1999. "Fiscal Decentralization and Government Size in Latin America," Journal of Applied Economics, Taylor & Francis Journals, vol. 2(2), pages 357-391, November.
    5. Massimo Bordignon & Alberto Zanardi, 1997. "Tax Evasion in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(3-4), pages 169-210, December.
    6. Teresa Garcia-Milà & Timothy J. Goodspeed & Therese J. McGuire, 2001. "Fiscal decentralization policies and sub-national government debt in evolving federations," Economics Working Papers 549, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2002.
    7. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    8. von Hagen, Jurgen & Eichengreen, Barry, 1996. "Federalism, Fiscal Restraints, and European Monetary Union," American Economic Review, American Economic Association, vol. 86(2), pages 134-138, May.
    9. Bordignon, Massimo & Minelli, Enrico, 2001. "Rules transparency and political accountability," Journal of Public Economics, Elsevier, vol. 80(1), pages 73-98, April.
    10. Giorgio Brosio & David Hyman & Walter Santagata, 1980. "Revenue sharing and local public spending: The Italian experience," Public Choice, Springer, vol. 35(1), pages 3-15, January.
    11. Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 567-586.
    12. Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.
    13. Massimo Bordignon & Paolo Manasse & Guido Tabellini, "undated". "Come Fare la Perequazione Regionale in Italia? Parte I," Working Papers 107, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alice Y. Ouyang & Rui Li, 2021. "Fiscal decentralization and the default risk of Chinese local government debts," Contemporary Economic Policy, Western Economic Association International, vol. 39(3), pages 641-667, July.
    2. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
    3. Jorge Martinez-Vazquez & Violeta Vulovic, 2017. "How well do subnational borrowing regulations work?," Chapters, in: Naoyuki Yoshino & Peter J. Morgan (ed.), Central and Local Government Relations in Asia, chapter 5, pages 161-220, Edward Elgar Publishing.
    4. Ernesto Crivelli & Klaas Staal, 2013. "Size, spillovers and soft budget constraints," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 338-356, April.
    5. Ernesto Crivelli, 2012. "Local Governments’ Fiscal Balance, Privatization, and Banking Sector Reform in Transition Countries," IMF Working Papers 2012/146, International Monetary Fund.
    6. Jia, Junxue & Liu, Yongzheng & Martinez-Vazquez, Jorge & Zhang, Kewei, 2021. "Vertical fiscal imbalance and local fiscal indiscipline: Empirical evidence from China," European Journal of Political Economy, Elsevier, vol. 68(C).
    7. Agnese Sacchi & Simone Salotti, 2017. "The influence of decentralized taxes and intergovernmental grants on local spending volatility," Regional Studies, Taylor & Francis Journals, vol. 51(4), pages 507-522, April.
    8. Lars P. Feld & Gebhard Kirchgässner & Christoph A. Schaltegger, 2010. "Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments," Southern Economic Journal, John Wiley & Sons, vol. 77(1), pages 27-48, July.
    9. Paolo Liberati & Agnese Sacchi, 2013. "Tax decentralization and local government size," Public Choice, Springer, vol. 157(1), pages 183-205, October.
    10. Allers, Maarten & Merkus, Erik, 2013. "Soft budget constraint but no moral hazard? The Dutch local government bailout puzzle," Research Report 13014-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    11. Buettner, Thiess, 2009. "The contribution of equalization transfers to fiscal adjustment: Empirical results for German municipalities and a US-German comparison," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 417-431, September.
    12. Zarko Kalamov & Klaas Staal, 2016. "Public debt, bailouts, and common bonds," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(4), pages 670-692, August.
    13. Fabio Padovano, 2014. "Distribution of transfers and soft budget spending behaviors: evidence from Italian regions," Public Choice, Springer, vol. 161(1), pages 11-29, October.
    14. Anwar Shah, 2006. "Fiscal decentralization and macroeconomic management," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(4), pages 437-462, August.
    15. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(4), pages 695-729, October.
    16. Isabel Argimón & Pablo Hernández de Cos, 2012. "Fiscal Rules and Federalism as Determinants of Budget Performance," Public Finance Review, , vol. 40(1), pages 30-65, January.
    17. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    18. Akai, Nobuo & Sato, Motohiro, 2008. "Too big or too small? A synthetic view of the commitment problem of interregional transfers," Journal of Urban Economics, Elsevier, vol. 64(3), pages 551-559, November.
    19. Kalamov, Zarko & Staal, Klaas, 2023. "Too-big-to-fail in federations?," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    20. Christl, Michael & Köppl-Turyna, Monika & Kucsera, Dénes, 2018. "Public sector efficiency in Europe: Long-run trends, recent developments and determinants," Working Papers 14, Agenda Austria.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:wpaper:3099. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.