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

43 Pages Posted: 19 Apr 2011

See all articles by Massimo Bordignon

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 2000

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

Bordignon, Massimo, Problems of Soft Budget Constraints in Intergovernmental Relationships: The Case of Italy (November 2000). IDB Working Paper No. 125, Available at SSRN: https://ssrn.com/abstract=1814671 or http://dx.doi.org/10.2139/ssrn.1814671

Massimo Bordignon (Contact Author)

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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