دانلود مقاله ISI انگلیسی شماره 23648
عنوان فارسی مقاله

ریشه های بدهی های عمومی ایتالیا: منافع جغرافیایی پراکنده؟

کد مقاله سال انتشار مقاله انگلیسی ترجمه فارسی تعداد کلمات
23648 2014 20 صفحه PDF سفارش دهید محاسبه نشده
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عنوان انگلیسی
The origins of the public debt of Italy: Geographically dispersed interests?
منبع

Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)

Journal : Journal of Policy Modeling, Volume 36, Issue 1, January–February 2014, Pages 43–62

کلمات کلیدی
کسری بودجه عمومی - بدهی های عمومی ایتالیا - سرمایه مشترک - منافع جغرافیایی پراکنده
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پیش نمایش مقاله ریشه های بدهی های عمومی ایتالیا: منافع جغرافیایی پراکنده؟

چکیده انگلیسی

In this paper we reconstruct the macro regional government deficits of Italy and find that the aggregate deficit resulting from our estimates captures quite well the entire dynamics of the Italian national public deficit. This new data set shows that the ultimate cause of the accumulation of public debt of Italy lies in the extraordinary fiscal imbalance of the Southern regions. The new data allow us to test empirically a simple Common Pool model, augmented by a variable measuring the political influence of each macro region in the Government, to verify the existence of a geographically dispersed interests issue for the Italian case. Our measure of political influence turns out to significantly explain the regions’ deficits also when controlling for population and income gaps. In addition, using a J-test approach, we find that including the predictions of the Common Pool–Pork Barrel regional model into a general model of the Italian national deficit turns out to greatly increase its explanatory power. The results call for deep institutional reforms of the fiscal decentralization so far implemented in Italy.

مقدمه انگلیسی

Italy displays the third largest sovereign debt of the world and the eighth when it is GDP weighted. This large stock is not the result of some sudden large banks’ bailout but it has been cumulated in a very long period of discrete deficits. This makes the Italian case an important case study when discussing the origins and causes of persistent deficits and the consequent large public debts. Apparently, Italy's debt shares its dynamics with those of several other developed countries, although the Italian case appears somewhat amplified (see Fig. 1). In what follows we will put some evidence against this alleged similarity The positive trend in the accumulation of public debt of many developed countries, typically from the seventies onward, questioned the traditional normative theories of public debt or deficits, either of Keynesian or Neoclassical stream, and opened up the field to the positive theories of public debt. In an important survey, Alesina and Perotti (1994) singled out several theories potentially able to account for this behavior, and discussed their pros and cons.2 The last set of theories considered by Alesina and Perotti (1994) are models of geographically dispersed interests. These models have not been empirically adapted and tested to the Italian case yet. In this paper we fill the gap in order to shed light on the ultimate cause of the accumulation of public debt of Italy. In general, models of geographically dispersed interests imply that, as in many Common Pool problems, whenever the decision-making is in the hands of representatives of different geographic constituencies, budget formation could be conducive to excessive spending (Pisauro, 2001, Tanzi, 1996 and Weingast et al., 1981). In fact, the advantages of public projects are overestimated by holders of those geographic interests when costs are spread nationwide but benefits concern only particular districts. Thus, there is an incentive for geographic representatives to oversupply geographic based projects and this, in turn, raises the issue of the so called “Pork Barrel” spending.3Persson and Tabellini (2000), assuming a lump sum taxation, show that when public expenditure decisions are decentralized and its financing ex-post centralized the regional governments tend to overspend, especially the smallest ones. It is not difficult to extend the former results to the decentralized case when tax is proportional to income and incomes differ. In this set up, one gets that the smaller and the poorer the region is the larger turns out to be its public expenditure (see Appendix). A typical issue that arises in this contest is the debate about fiscal decentralization and in particular the one of hard versus soft budget constraint for decentralized governments, which was analyzed by Weingast (1995), and McKinnon (1997) among others. Hard budget constraint means that clear rules about who bears the cost of what are defined but, also, that lower-level policy makers should not have access to unlimited credit and central government should not bail them out in every case of fiscal distress. The lack of commitment opens the room for fiscal looseness. Scholars also consider some positive theories of transfers from the center to the periphery determined on a political barter known as “Pork Barrel politics” and the role played by electoral systems in such a context. According to Cox and McCubbins (1986) transfers should favor those political districts which are more stably pro government whereas Lindbeck and Weibull (1987) and Dixit and Londregan (1996) question somehow the view that the political alignment of local governments should favor them suggesting that scarce resources should be more conveniently invested where they can make the difference, i.e. toward more unbalanced districts and voter types. How much of the above considerations about geographically dispersed interests does it concern Italy? In truth, the Italian institutional set up, both in terms of rules governing fiscal decentralization and electoral system, appears to indicate Italy as a promising case study to analyze these issues. In facts, as underlined by several Italian public finance researchers (Bordignon, 2000, Bordignon and Cerniglia, 2004 and Bordignon and Turati, 2009, among others) the financial set up regulating the relationship between Italian regions and the central government shares many of the characteristics of a soft budget constraint case.4As for “Pork Barrel politics” and the direction of the “alignment effect” of local governments, Golden and Picci (2008) tested the two different theories on the Italian case, and the institutional conditions for their application. They find that “when districts elect more powerful individuals off the lists of governing parties, they secure more infrastructure investments. The parties of the Italian incumbent government are not more successful in securing resources for districts when they receive larger vote shares.” According to Golden and Picci (2008), the fact that a region is firmly in the hand of the incumbent coalition parties is a necessary but not sufficient condition to observe a large flow of funds from the central government. It is also necessary that the power is in the hand of influential politicians, and, as Golden and Picci (2012) show, the influence is also determined by the stability of the elected, the electoral system in place, the capacity of the diverting resources from the center as implied by the Pork Barrel hypothesis. This would explains, according to authors, the greater capacity of diverting resources of the southern Italian regions which have been characterized by a lower political turnover with respect to the rest of the country. In summary, Italy presents many of the pre-conditions for the existence of both Common Pool mechanisms and Pork Barrel politics (CP–PB from now on). However, to empirically test the relevance of such mechanisms, a long time series of the regional Italian fiscal imbalances is needed. Unfortunately, these data were not available till now. In the following we explain how we have accomplished this task for Italy's Northeast, Northwest, Center and South macro regional government deficits and we explore and discuss which theories, among the ones listed by Alesina and Perotti (1994), seem to better account for the Italian experience, bringing evidence in favor of the CP–PB approach. Anticipating the main conclusions, we find that the incredibly large and persistent fiscal imbalances of poorer Southern regions are the ultimate cause of the National Public debt of Italy. Starting from the seventies and over more than two decades, the deficit to GDP ratio of the South of Italy stayed well above 25%, with a peak of 35%, and only recently it has reached a “more reasonable” value of 15% (the first time in 1997 and then again in 2007). Moreover, the new data allow us to test empirically a simple Common Pool model, augmented by a variable measuring the political influence of each macro region in the Government. This allows us to distinguish the existence of a geographically dispersed interests issue from the working of a fiscal progressive system coupled with lack of regional income convergence. Our measure of political influence turns out to significantly explain the regions’ deficits also when controlling for population and income gaps. In addition, using a J-test approach, we find that including the predictions of the Common Pool–Pork Barrel regional model into a general model of Italian national deficit turns out to greatly increase its explanatory power. The paper is organized as follows. Section two presents a brief review of the empirics about the Italian debt dynamics. Section three investigates the regional origins of the national fiscal imbalance reconstructing the regional fiscal deficits figures and test the Common Pool–Pork Barrel hypothesis on this new data set. In Section four, we assess the capacity of the CP–PB hypothesis to account for the national debt dynamics. Section five summarizes and concludes.

نتیجه گیری انگلیسی

Fifty years or so of resilient fiscal imbalances have built the very large Italian debt. The Italian debt issue has been researched in both cross-country studies and as a single case, but not all of the several theoretical approaches proposed in the literature have been taken into consideration. In particular, the geographically dispersed interests approach listed by Alesina and Perotti (1994) have not been contemplated as a possible explanation for the Italian case, quite likely because of the lack of data, despite many clues indicate the possible relevance of this approach to explain the Italian Public debt dynamics. In this paper, we try to overcome this missing using an indirect approach to calculate the regional deficits that relies on regional national accounts. We reconstruct the time series of regional deficits over GDP, using the available published information from several sources, and disaggregate the National Deficit figures into four macro regional deficits. The process of this cumbersome calculation is not without caveats and simplifications, due to limited data availability. Our estimates should be considered the narrower bounds of Macro Area Deficits and Surpluses as Appendix on data reconstruction clarifies. Notwithstanding, all criticizable assumptions we have to make do not call into question the main results and they constitute minor sacrifices compared to the wealth of information they bring about. Firstly, we find that the incredibly large and persistent fiscal imbalances of poorer Southern regions are the ultimate cause of the National Public debt of Italy. Over more than two decades, the deficit to GDP ratio of the South of Italy stayed well above 25%, with a peak of 35%, and only recently it has reached a “more reasonable” value of 15%. Secondly, we were able to test the geographically dispersed interests approach. Our figures are clearly coherent with the existence of a Common Pool mechanism. This is so for the Common Pool mechanism implies that poorest regions are those which overspend more in the case of lump sum taxation, the more so when taxation is proportional (or progressive) to income. However, given the relative centralized nature of the Italian Institutional set up, this is not sufficient. It is also necessary, in theory, that the smallest and poorest regions were capable to divert resources from the center. This is, in fact, what we believe it took and still takes place, with all the features of Pork Barrel politics at work in addition to a CP one. A skeptical reader, on the other hand, would retort that the persistent fiscal deficits of the poorer regions could simply be the outcome of a progressive fiscal set up applied to a situation of persistent income gap. To empirically discriminate between these two channels we build a variable, PW, constructed to capture the influence of the macro regions in the government. We find that the political influence drives the macro-regions’ fiscal deficits and in particular the greatest, the Southern one, whose dynamics is not explained by its income gap but by PW. We do not claim that the CP–PB has been the only force pushing up the Italian public debt but an important one among the others. We then test the positive theoretical approaches suggested in the literature to account for large and persistent deficits as well as the explanatory power of normative theories, the Keynesian and the neoclassical Tax-Smoothing approach. The findings of Galli and Padovano, 1998 and Galli and Padovano, 2002 and, partially, Galli and Padovano (2005) are substantially confirmed at this stage of analysis which differ in the variables used and the econometrics employed, also because of the different time series properties of our variables, namely trend-stationarity (with breaks). We finally test whether our CP–PB explanation of the large macro regional deficits could be also important at the national level. We test it using a J-test approach. We take the residuals of our estimated regional models and add them up to have a national aggregate deficit stemming from the CP–PB approach. We found that this variable does have extra explanatory power, causing, in addition, a remarkable increase in the adjusted R-squared as well as a significant decrease in the S.E. of regression. We believe that both the new macro regional deficit figures as well as the econometric analysis we present have remarkable policy implications especially as far as institutional reforms are concerned.23 In fact, it appears clear that the problematic Italian national fiscal imbalance cannot be tackled relying only on macroeconomic policies of national fiscal moderation or market reforms24 but it is necessary unhinging the political mechanisms which led toward the local governments’ profligacy. The implied policy recommendations are the introduction of a tight set of hard budget rules and fiscal responsibility that must substitute the current set of norms and discretionary budget procedures which led to the present soft budget context in which CO-PB mechanisms flourished. It is also crucial that a strong commitment of the central government not to bail out any sub-central government debt shall also be inserted in official norms. Clearly, the evidence we reported showed that the present institutional set up which is in between centralization and decentralization, that is decentralization without fiscal responsibility, is indeed unsustainable.25 The challenge facing Italy involves not only the adoption of the right macro fiscal policy mix as well as the necessary pro market reforms, but it also takes the form of deep institutional reforms which go directly to the core of the governmental functioning of the State.

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