IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/14455.html
   My bibliography  Save this paper

The Domestic Stability Pact: Assessment of the Italian experience and comparison with the other EMU countries

Author

Listed:
  • Giuriato, Luisa
  • Gastaldi, Francesca

Abstract

The 1999-2006 versions of the Italian Domestic Stability Pact had many shortcomings and a modest impact with respect to the aim of aligning the fiscal behaviour of sub-national government units with the national commitments under the European Stability and Growth Pact. The Domestic Pact was revised in 2007 and 2008 to tighten the monitoring and sanctions framework and prevent some inefficient behaviour. However, some undesirable features still mar the new regime: no coordination exists between the Domestic Pact and the debt and tax constraints applied to local governments; a clear definition of the contribution of sub-national governments to aggregate compliance with the external rule is still lacking; flexibility has been introduced by means of an artificial reference budget balance; side effects on resource redistribution are ignored; and monitoring and sanctioning remain weak. Remedies for the above shortcomings can possibly be found in the domestic pacts of the other EMU countries. Most of all, the Domestic Pact should be adjusted to the specific characteristics of fiscal decentralization in Italy, where a large fiscal gap exists, revenue autonomy is constrained and a large share of the responsibility for spending is rigid and politically sensitive.

Suggested Citation

  • Giuriato, Luisa & Gastaldi, Francesca, 2008. "The Domestic Stability Pact: Assessment of the Italian experience and comparison with the other EMU countries," MPRA Paper 14455, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:14455
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/14455/2/MPRA_paper_14455.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Douglas Sutherland & Robert Price & Isabelle Joumard, 2005. "Fiscal Rules for Sub-central Governments: Design and Impact," OECD Economics Department Working Papers 465, OECD Publishing.
    2. Mr. Guiseppe Pisauro, 2001. "Intergovernmental Relations and Fiscal Discipline: Between Commons and Soft Budget Constraints," IMF Working Papers 2001/065, International Monetary Fund.
    3. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-646, May.
    4. Breton, Albert, 1977. "The Theory of Local Government Finance and the Debt Regulation of Local Governments," Public Finance = Finances publiques, , vol. 32(1), pages 16-28.
    5. 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.
    6. Astrid Lübke, 2006. "Fiscal Discipline between Levels of Government in Germany," OECD Journal on Budgeting, OECD Publishing, vol. 5(2), pages 23-37.
    7. Miguel Miaja, 2006. "Fiscal Discipline in a Decentralised Administration: The Spanish Experience," OECD Journal on Budgeting, OECD Publishing, vol. 5(2), pages 39-54.
    8. Ehtisham Ahmad & Maria Albino-War & Raju Singh, 2006. "Subnational Public Financial Management: Institutions and Macroeconomic Considerations," Chapters, in: Ehtisham Ahmad & Giorgio Brosio (ed.), Handbook of Fiscal Federalism, chapter 16, Edward Elgar Publishing.
    9. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
    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. Giuriato, Luisa & Gastaldi, Francesca, 2009. "The domestic stability pact in Italy: a rule for discipline?," MPRA Paper 15183, University Library of Munich, Germany.
    2. Sanguinetti, Pablo & Tommasi, Mariano, 2004. "Intergovernmental transfers and fiscal behavior insurance versus aggregate discipline," Journal of International Economics, Elsevier, vol. 62(1), pages 149-170, January.
    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. Eichler, Stefan & Hofmann, Michael, 2013. "Sovereign default risk and decentralization: Evidence for emerging markets," European Journal of Political Economy, Elsevier, vol. 32(C), pages 113-134.
    5. 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.
    6. Cornes, Richard C. & Silva, Emilson C. D., 2000. "Local Public Goods, Risk Sharing, and Private Information in Federal Systems," Journal of Urban Economics, Elsevier, vol. 47(1), pages 39-60, January.
    7. Anton Bondarev & Beat Hintermann & Frank C. Krysiak & Ralph Winkler, 2017. "The Intricacy of Adapting to Climate Change: Flood Protection as a Local Public Goods Game," CESifo Working Paper Series 6382, CESifo.
    8. Timothy Goodspeed & Andrew Haughwout, 2012. "On the optimal design of disaster insurance in a federation," Economics of Governance, Springer, vol. 13(1), pages 1-27, March.
    9. Maria EL KHDARI, 2015. "Déterminants des transferts intergouvernementaux : le cas des communes Marocaines," Working Papers 201531, CERDI.
    10. Albert Solé Ollé, 2010. "The Determinants of the Regional Allocation of Infrastructure Investment in Spain," Chapters, in: Núria Bosch & Marta Espasa & Albert Solé Ollé (ed.), The Political Economy of Inter-Regional Fiscal Flows, chapter 12, Edward Elgar Publishing.
    11. Giannola, Adriano & Petraglia, Carmelo & Scalera, Domenico, 2016. "Net fiscal flows and interregional redistribution in Italy: A long-run perspective (1951–2010)," Structural Change and Economic Dynamics, Elsevier, vol. 39(C), pages 1-16.
    12. Veronica Grembi & Alvaro Manoel, 2012. "Fiscal rules for subnational governments? Evidence from Latin America," Chapters, in: Giorgio Brosio & Juan P. Jiménez (ed.), Decentralization and Reform in Latin America, chapter 12, pages iii-iii, Edward Elgar Publishing.
    13. Breuille, Marie-Laure & Gary-Bobo, Robert J., 2007. "Sharing budgetary austerity under free mobility and asymmetric information: An optimal regulation approach to fiscal federalism," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1177-1196, June.
    14. 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.
    15. Veronica Grembi & Tommaso Nannicini & Ugo Troiano, 2011. "Policy Responses to Fiscal Restraints: A Difference-in-Discontinuities Design," Working Papers 397, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Paolo Manasse & Christian Schultz, "undated". "Regional Redistribution and Migration," Working Papers 146, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    17. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "The Political Economy of International Unions," NBER Working Papers 8645, National Bureau of Economic Research, Inc.
    18. Nicola Persico & Alessandro Lizzeri, 2001. "The Provision of Public Goods under Alternative Electoral Incentives," American Economic Review, American Economic Association, vol. 91(1), pages 225-239, March.
    19. Boggio, Margherita, 2011. "From Reluctant Privatization to Municipal Capitalism: an Overview on Ownership, Political Connections and Decentralization," MPRA Paper 46232, University Library of Munich, Germany.
    20. Robin Boadway, 2004. "The Theory and Practice of Equalization," CESifo Economic Studies, CESifo Group, vol. 50(1), pages 211-254.

    More about this item

    Keywords

    Domestic stability Pact;

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    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:pra:mprapa:14455. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.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.