Subnational Government Bailouts in OECD Countries: Four Case Studies

39 Pages Posted: 19 Apr 2011

See all articles by Jürgen von Hagen

Jürgen von Hagen

University of Bonn

Massimo Bordignon

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

Matz Dahlberg

Uppsala University; CESifo (Center for Economic Studies and Ifo Institute)

Bhajan S. Grewal

affiliation not provided to SSRN

Per Peterson

affiliation not provided to SSRN

Helmut Seitz

Dresden University of Technology - Institute for Applied Public Finances and Fiscal Policy; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 2000

Abstract

We present four case studies of bailouts of subnational governments in Australia, Germany, Italy and Sweden. The case studies show that bailouts can occur in a diverse set of institutions shaping the relations between central and subnational governments. Surpisingly, there is little evidence in favor of the `too big to fail` argument explaining bailouts. In contrast, elements of political favoritism play some role in most cases. The cases also indicate the importance of properly designing principal-agent relationships in the decentralization of public finances. Constitutional mandates for uniform provision of public services and attempts by the central government to dominate subnational governments in matters of fiscal policy seem to be conducive to bailouts.

Suggested Citation

Hagen, Jürgen von and Bordignon, Massimo and Dahlberg, Matz and Grewal, Bhajan S. and Peterson, Per and Seitz, Helmut, Subnational Government Bailouts in OECD Countries: Four Case Studies (November 2000). IDB Working Paper No. 126, Available at SSRN: https://ssrn.com/abstract=1814672 or http://dx.doi.org/10.2139/ssrn.1814672

Jürgen von Hagen (Contact Author)

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Massimo Bordignon

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

Matz Dahlberg

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bhajan S. Grewal

affiliation not provided to SSRN

No Address Available

Per Peterson

affiliation not provided to SSRN

No Address Available

Helmut Seitz

Dresden University of Technology - Institute for Applied Public Finances and Fiscal Policy ( email )

Helmholtzstrasse 10
D-01062 Dresden
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
106
Abstract Views
716
rank
286,153
PlumX Metrics