Public expenditure in time of crisis: are Italian policymakers choosing the right mix?
- 2 Downloads
In the ‘austerity debate’ a crucial issue is the composition of fiscal adjustment. This article provides empirical evidence on the relationship between economic crisis episodes and composition of public expenditure by examining the impact of economic crises on the share of different types of public spending in total public expenditure in the Italian regions. Our results suggest that fiscal consolidation strategies have not had growth-friendly expenditure composition. The crisis aggravated budgetary trade-offs by reducing the share of discretionary spending such as public investments.
KeywordsEconomic crisis Composition of government expenditure Panel data
JEL ClassificationR50 C23 E62
We are grateful to the two anonymous referees for their valuable comments and suggestions that have substantially enhanced the clarity and quality of the paper. We wish to thank participants to the IES Lunch Seminar (Napoli, April 19 2018). All remaining errors are, of course, our sole responsibility.
- Accetturo, A., Bassanetti, A., Bugamelli, M., Faiella, I., Finaldi Russo, P., Franco, D., et al. (2013). Il sistema industriale italiano tra globalizzazione e crisi. Bank of Italy Occasional Paper No. 193. Rome: Bank of Italy.Google Scholar
- Ambrosanio, M. F., Balduzzi, P., & Bordignon, M. (2016). Economic crisis and fiscal federalism in Italy. In E. Ahmad, M. Bordignon, & G. Brosio (Eds.), Multi-Level Finance and the Euro Crisis—Causes and Effects. Cheltenham: Edward Elgar Publishing.Google Scholar
- Ambrosanio, M. F., Bordignon, M., & Cerniglia, F. (2010). Constitutional reforms, fiscal decentralization and regional fiscal flows in Italy. In N. Bosch, M. Espasa, & A. Sole Ollè (Eds.), The Political Economy of Inter-Regional Fiscal Flows, Measurement, Determinants and Effects on Country Stability. Cheltenham: Edward Elgar Publishing.Google Scholar
- Arberger, K., & Nierhaus, W. (2008). How to define a recession? CESifo Forum, 9(4), 74–76.Google Scholar
- Barbiero, F., & Darvas, Z. (2014). In Sickness and in Health: Protecting and Supporting Public Investment in Europe. In Bruegel Policy Contribution 2014/02.Google Scholar
- Belotti, F., Hughes, G., & Mortari, A. P. (2013). XSMLE: Stata module for spatial panel data models estimation. Statistical Software Components. Boston: Boston College Department of Economics.Google Scholar
- Blöchliger, H., Rabesona, J. (2009). The Fiscal Autonomy of Sub-Central Governments: An Update. In OECD Working Papers on Fiscal Federalism No. 9. Paris: OECD Publishing.Google Scholar
- Borcherding, T. E., Ferris, S. F., & Garzoni, A. (2004). Growth in the real size of government since 1970. In R. E. Wagner & J. G. Backhaus (Eds.), Handbook of Public Finance. Dordrecht: Kluwer.Google Scholar
- Brumby, J., & Verhoeven, M. (2010). Public expenditure after the global financial crisis. In O. Canuto & M. Guigale (Eds.), The Day After Tomorrow: A Handbook on the Future of Economic Policy in the Developing World. Washington, DC: World Bank.Google Scholar
- Cioffi, M., Messina, G., Tommasino, P. (2012). Parties, Institutions and Political Budget Cycles at the Municipal Level. In Bank of Italy Working Paper No. 885, Bank of Italy.Google Scholar
- Eichengreen, B. (2016). Confronting the Fiscal Bogeyman. Project Syndicate. https://www.project-syndicateorg/commentary/monetary-policy-limits-fiscal-expansion-by-barry-eichengreen-2016-03.
- European Commission. (2013a). Fiscal Relations Across Government Levels in Times of Crisis—Making Compatible Fiscal Decentralization and Budgetary Discipline. In European Economy, Economic Papers 501.Google Scholar
- European Commission (2013b) Report on Public Finances in EMU 2013. In European Economy 4.Google Scholar
- Fatás, A., Summers, L.H. (2016). The Permanent Effects of Fiscal Consolidations. In NBER Working Paper 22734.Google Scholar
- Iuzzolino, G., Pellegrini, G., & Viesti, G. (2013). Regional convergence. In G. Toniolo (Ed.), The Oxford Handbook of the Italian Economy Since Unification. New York: Oxford University Press.Google Scholar
- Lorenzani, D., Reitano, V.E. (2015). Italy’s Spending Maze Runner: An Analysis of the Structure and Evolution of Public Expenditure in Italy. In European Economy Discussion Papers 23.Google Scholar
- Moscone, F., & Knapp, M. (2005). Exploring the spatial pattern of mental health expenditure. Journal of Mental Health Policy and Economics, 8(4), 205–217.Google Scholar
- Rogoff, K. (1990). Equilibrium political budget cycles. American Economic Review, 80(1), 21–36.Google Scholar
- Vammalle, C., Hulbert, C. (2013). Sub-National Finances and Fiscal Consolidation: Walking on Thin Ice. In OECD Regional Development Working Papers 2013/02. Paris: OECD Publishing.Google Scholar
- Veugelers, R. (2014). Undercutting the Future? European Research Spending in Times of Fiscal Consolidation. In Bruegel Policy Contribution 2014/06.Google Scholar