EconPapers    
Economics at your fingertips  
 

Fiscal consolidation by intergovernmental transfers cuts? The unpleasant effect on expenditure arrears

Paolo Chiades, Luciano Greco, Vanni Mengotto, Luigi Moretti and Paola Valbonesi ()

Economic Modelling, 2019, vol. 77, issue C, 266-275

Abstract: For the period 2003–2014, we investigate unexplored effects of fiscal consolidation in decentralized public finance on a large dataset of Italian municipalities. Based on a simple, realistic theoretical model, we show that municipalities increase arrears on committed investment expenditure as a response to intergovernmental transfer cuts. Then, we test our predictions controlling for potential sources of endogeneity, and find that a reduction in intergovernmental transfers causes a significant increase in arrears, in addition to other common adjustments to local fiscal policies (e.g., tax revenues). Our results highlight a perverse effect of fiscal consolidation packages implemented by centrally imposed fiscal restraints.

Keywords: Expenditure commitments; Fiscal federalism; Fiscal rules; Instrumental variables (search for similar items in EconPapers)
JEL-codes: H30 H72 H77 C33 C36 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999317308829
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fiscal consolidation by intergovernmental transfers cuts? The unpleasant effect on expenditure arrears (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:77:y:2019:i:c:p:266-275

DOI: 10.1016/j.econmod.2018.09.008

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-07-03
Handle: RePEc:eee:ecmode:v:77:y:2019:i:c:p:266-275