Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/76621 
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper No. 1026
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
In this paper we propose a simple model of bailing out that closely describes the intergovernmental relationships between the Central government and the regional governments in the Italian public health care sector. The theoretical model suggests that bail out expectations by regions can be thought as the missing variable emphasised by Culyer (1988) in empirical models explaining health expenditure. We test this prediction by using data on regional health expenditure during the years 1990-1999. We show that financing by regions is influenced by political variables that capture changes in bail out expectations. This “expected” funding has a positive relationship with expenditure, even when Central government decreased financing to regions. Moreover, the “alignment effect” shows that “friendly” regional governments receive more money and support Central government by reducing expenditure.
Subjects: 
health care expenditure
intergovernmental relationships
Document Type: 
Working Paper
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