La spesa pubblica in Italia: una crescita senza limiti?

Using new historical data, this paper evaluates Wagner’s Law in Italy over the time period from 1862 to 2009. To this aim, cointegration and Granger causation are used to investigate the long run relationship between government expenditure and GDP. Moreover, DOLS method is applied to estimate consistent long run elasticity between these two variables. Our main findings are that Wagner’s Law does not hold in the long run for total government expenditure. However, we find strong support for Wagner’s Law in the shorter time span from 1862 to the end of the 19th century. Such a result seems the consequence of state-building after Italy’s political unification. The new-born Italian state made a huge effort to create nation-wide infrastructures (i.e., railways, telegraph, mail, and so on) as well as an administrative structure well-ramified throughout the country. Conversely, evidence in support of Wagner’s Law is weaker in the period following WW2. Now Wagner’s Law is not verified for total government expenditure, but only for social spending, infrastructure spending, and spending for subsidies to the economy. This seems the consequence of the expansion of income-elastic cultural and welfare expenditures that were demanded to the state

Government expenditure and economic development: evidence from Italy 1862-2009

Using a new historical dataset over the time period 1862-2009, this paper tests the validity of Wagner’s Law of public spending (WL) in Italy. To this aim, cointegration and Granger causation are used to investigate the long run relationship between GDP and government expenditure. Moreover, DOLS method is applied to estimate consistent long run elasticity between these two variables. In contrast to previous studies, we evaluate WL for both total government expenditure and some specific items of spending. Our main findings are that WL does not hold in the long run for total government expenditure. However, we find strong support for WL in the shorter time span from 1862 to the end of the 19th century. Here WL is confirmed as regards both total government expenditure and all the specific items of spending we have considered. Conversely, in the post-Second World War years, WL holds only for capital expenditure, compensation of employees, justice and national security, welfare and redistribution by the state. Thus, it seems that Italy invested a great deal and for a long period in infrastructures, justice, national security, and welfare, and less in items such as education and culture that play a paramount role in the formation of human capital

Does War Make States? Military Spending and the Italian State building, 1861-1945

We present empirical evidence on the relationship between military spending and the expansion of other governmental budgetary heading and tax revenues from the Unification of Italy (1861) up to the end of World War II. Mainly in the years preceding 1922, investments in education and social transfers to families moves together with the defense spending. That is, positive changes in defense implies both an increase in education and in transfers. Moreover, transfers also have a compensatory role during recessive phases. Positive changes in defence do not crowd out the investment in capital spending, while disinvestments in defense are associated with an increase in the investment in capital. The pro-cyclical behavior of the tax revenues is compatible with a debt financing dynamic of many government expenditures. Although our analytic narrative is not universally valid, it can support the persistent centrality of external war in the discontinuous development and expansion of the Italian central State, with some exceptions explained by the historical experience

Does War Make States? Military Spending and the Italian State building, 1861-1945

We present empirical evidence on the relationship between military spending and the expansion of other governmental budgetary heading and tax revenues from the Unification of Italy (1861) up to the end of World War II. Mainly in the years preceding 1922, investments in education and social transfers to families moves together with the defense spending. That is, positive changes in defense implies both an increase in education and in transfers. Moreover, transfers also have a compensatory role during recessive phases. Positive changes in defence do not crowd out the investment in capital spending, while disinvestments in defense are associated with an increase in the investment in capital. The pro-cyclical behavior of the tax revenues is compatible with a debt financing dynamic of many government expenditures. Although our analytic narrative is not universally valid, it can support the persistent centrality of external war in the discontinuous development and expansion of the Italian central State, with some exceptions explained by the historical experience

Political stabilization by an independent Central Bank

The paper is an extension of the Gabillon and Martimort model (2004), which studies how the independence of the institution in charge of monetary policy may stabilize inflationary fluctuations due to political uncertainty when the economy is characterized by lobbies that seek to promote their own interests to the detriment of the general interests of society

Monetary policy in the presence of imperfect observability of the objectives of Central Bankers

The paper presents a theoretical model for analysis of the imperfect observability of central bank preferences by the private sector on the decisions taken by the monetary authority, and therefore on the inflation rate. It examines in particular the connection which, in the presence of a time inconsistency problem, arises between the observability of the monetary institution's goals and its equilibrium strategies. The model yields innovative results from the technical and economic points of view. From the technical point of view, the study of equilibrium strategies in a simple signalling model allows derivation of the equilibrium outcomes of a monetary policy game already examined by D'Amato and Pistoresi (1996) and Sibert (2002), without the restrictions that those authors impose on the basis of the types of monetary institution. It is thus possible to identify the conditions on the model's parameters under which a pure separating equilibrium arises, and the conditions under which there instead exists a 'hybrid' equilibrium in which some types of Central Bankers adopt separating strategies (Vickers 1986; D'Amato and Pistoresi 1996; Sibert 2002) while others adopt pooling strategies similar to those studied by Backus and Dri¢ ll (1985). From an economic point of view, the paper shows a number of relations that arise, in equilibrium, between the degree of observability and transparency of the Central Banker's goals and the inflation rate set by the Central Banker

Government expenditure and economic development: evidence from Italy 1862-2009

Using a new historical dataset over the time period 1862-2009, this paper tests the validity of Wagner\u2019s Law of public spending (WL) in Italy. To this aim, cointegration and Granger causation are used to investigate the long run relationship between GDP and government expenditure. Moreover, DOLS method is applied to estimate consistent long run elasticity between these two variables. In contrast to previous studies, we evaluate WL for both total government expenditure and some specific items of spending. Our main findings are that WL does not hold in the long run for total government expenditure. However, we find strong support for WL in the shorter time span from 1862 to the end of the 19th century. Here WL is confirmed as regards both total government expenditure and all the specific items of spending we have considered. Conversely, in the post-Second World War years, WL holds only for capital expenditure, compensation of employees, justice and national security, welfare and redistribution by the state. Thus, it seems that Italy invested a great deal and for a long period in infrastructures, justice, national security, and welfare, and less in items such as education and culture that play a paramount role in the formation of human capital