by Jean-Michel Josselin ; Fabio Padovano ; Yvon Rocaboy
Start page: 317 - End page: 354
Keywords: Comparative analysis; Unitary states; Transfer expectations; Soft budget spending behavior; Intergovernmental relations; Local publicspending; Bailing out.
Jel code: D78; H71; H73; H77; P43; P48; P52
This paper analyses intergovernmental transfers in France and Italy to assess to which extent soft budget spending behaviors result from slack in fiscal constraints or from political factors. It innovates on the previous literature, which concentrated on single countries, by adopting a comparative perspective. We estimate two separate but identical autoregressive forecasting models on French and Italian data to evaluate how rules and political factors lead the regional administrators of each country to form their expectations about the amount of transfers they will receive from the central government. This allows to proxy the transfer expectations in both countries and their role in determining soft budget spending behaviors. The estimates indicate that transfer expectations are a quantitatively important component of regional spending in both countries, regardless thedifferent degrees of stringency of grant legislations and the type of grants and expenditures (total, currentand capital) examined.