Collective Risks in Local Administrations: Can a Private Insurer Be Better than a Public Mutual Fund?

In this paper we consider the institutional arrangements needed in a decentralised framework to cope with the potential adverse welfare effects caused by localized negative shocks (e.g., natural disasters, terrorist attacks, or even clinical errors) that can be limited by precautionary investments. We model the role of a public mutual fund to cover these “collective risks”. We start from the under-investment problem stemming from the moral hazard of Local administrations when the fund is managed by the Central government, which also takes into account the equalisation of resources across administrations. We then study the potential role of private insurers in solving the under-investment problem. Our analysis shows that the public fund is always superior to the private insurance solution in the presence of hard budget constraints. However, when the Central government cannot credibly commit to an optimal transfer rule, private insurers are sometimes able to improve on the public mutual fund solution by inducing a higher level of investments.intergovernmental relations, private insurer, collective risks

Bailing Out Expectations and Health Expenditure in Italy

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.health care expenditure, intergovernmental relationships

What are the causes of educational inequalities and of their evolution over time in Europe? Evidence from PISA

This paper provides evidence on the sources of differences in inequalities in educational scores in European Union member states, by decomposing them into their determining factors. Using PISA data from the 2000 and 2006 waves, the paper shows that inequalities emerge in all countries and in both period, but decreased in Germany, whilst they increased in France and Italy. Decomposition shows that educational inequalities do not only reflect background related inequality, but especially schools’ characteristics. The findings allow policy makers to target areas that may make a contribution in reducing educational inequalities.Education expenditures, educational inequalities, Oaxaca decomposition

Long-run and short-run constraints in the access to private health care services: evidence from selected european countries

This paper aims at distinguishing long-run and short-run constraints in the access to private health care services. To this end, we apply the methodology proposed by Carneiro and Heckman (2003) to the SHARE database, a survey conducted in a number of European countries, involving some 22,000 individuals over the age of 50. Micro-data includes information on health and health consumption, and socioeconomic variables (like income and wealth). Our results show that the problem of short-run constraints in the access to private health care services could be real, especially in Italy, Greece, and to some extent Spain. Moreover, there appear to be differences in the role of credit constraints, both considering more specific services, and gender differences.health inequalities, private health care services, credit constraints, family background

Does Fiscal Discipline towards Sub-national Governments Affect Citizens’ Well-being? Evidence on Health

This paper aims at assessing the impact of fiscal discipline towards sub-national governments on citizens’ well-being. We model fiscal discipline by considering the expectations of deficit bailouts by Central Government, and focus on a particular dimension of well-being, namely health outcomes at the regional level. We study then how bailout expectations affect the expenditure for health care policies carried out by Regional Governments: in the presence of opportunistic behaviours by local governments – induced by soft budget constraints – bailout expectations should affect only spending inefficiency, and should not have any real effects on citizens’ health. To investigate this issue, we model the efficient use of public resources for health care delivery as an input requirement frontier, and assess the effects of bailout expectations on both the structural component of health spending and its deviations from the best practice. The evidence from a sample of 15 Italian Regions observed from 1993 to 2006 highlights that bailout expectations do not significantly influence the position of the frontier, thus do not affect citizens’ health. However, they appear to exert a remarkable impact on excess spending.Intergovernmental relationships, Soft budget constraint, Bailout expectations, Health care policy, Spending efficiency

What are the causes of educational inequalities and of their evolution over time in Europe? Evidence from Pisa

This paper provides evidence on the sources of differences in inequalities in educational scores in European Union member states, by decomposing them into their determining factors. Using PISA data from the 2000 and 2006 waves, the paper shows that inequalities emerge in all countries and in both period, but decreased in Germany, whilst they increased in France and Italy. Decomposition shows that educational inequalities do not only reflect background related inequality, but especially schools’ characteristics. The findings allow policy makers to target areas that may make a contribution in reducing educational inequalities. However, they appear to exert a remarkable impact on excess spending.Education expenditures, educational inequalities, Oaxaca decomposition.

Healthy, educated and wealthy : Is the welfare state really harmful for growth?

In this paper, we study how public and private expenditures in health and education affect economic growth by their influence on people's health, abilities, skills and knowledge. We consider a growth accounting framework in order to test whether welfare expenditures more than offset the efficiency losses caused by distortionary taxation, and whether the effects of public expenditure on economic growth differ from those of private expenditure. Our empirical analysis is based on a panel of 19 OECD countries observed between 1971 and 1998. The results are consistent with the hypothesis that the contribution of welfare expenditures more than compensates for the distortions caused by the tax system; and the estimated positive impact is stronger for health than for education. We also find some evidence that public expenditure influences GDP growth more than private expenditure.- En este trabajo se estudia cómo el gasto público y privado en sanidad y educación afectan el crecimiento económico a través de su influencia en la salud, las habilidades y el conocimiento de los individuos. Se considera un modelo de contabilidad del crecimiento para verificar si los beneficios de los gastos sociales compensan las pérdidas de eficiencia generadas por la imposición; y si los efectos del gasto público difieren de los efectos del gasto privado. El análisis empírico se basa en un panel de 19 países de la OCDE estudiados entre el periodo de 1971 y 1998. Los resultados son consistentes con la hipótesis que afirma que la contribución del gasto social compensa las distorsiones causadas por los impuestos; y que el impacto positivo del gasto en sanidad es superior al observado para la educación. También se observa que el gasto público tiene un efecto superior sobre el crecimiento del PIB que el gasto privad

Hospital Industry Restructuring and Input Substitutability: Evidence from a Sample of Italian Hospitals

In this paper we investigate the economic rationality of the bed downsizing process characterising the hospital industry worldwide in the last decades, providing new evidence on the factor substitutability in the production of hospital services. We consider a sample of Italian regional producers and – differently from other studies – estimate a general cost function model, namely the Generalised Composite, firstly introduced by Pulley & Braunstein (1992). Alternative cost function specifications (included Translog) are estimated jointly with their associated input cost-share equations. For all models we derive Allen, Morishima and Shadow elasticities of substitution between input pairs, obtaining a fairly consistent picture across all specifications and elasticity concepts. More precisely, our results suggest a very limited degree of substitutability between factors in the production of hospital services (in particular, between beds and medical staff). These findings, consistent with previous evidence in the literature, suggest that a restructuring policy of the hospital industry which is confined to limiting the number of beds could not be a viable strategy for controlling the increase in public health care expenditure.Public health care expenditure, Hospital industry downsizing, Input substitutability