Municipalities and Excessive Debt: Local Insolvency Regimes as an Alternative to Bailouts?

Person, Christian

doi:10.1007/978-3-030-67466-3_12

Cited by 2 publications

(2 citation statements)

References 14 publications

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“…Italy, which together with Austria, Hungary and Switzerland, experiences a more severe insolvency regime (Person, 2021), was no exception. It was severely hit by the 2008 GR and local governments had to deal with harsh direct and indirect consequences (Ambrosanio et al 2016: 212).…”

Section: Introductionmentioning

confidence: 99%

“…First, there are incentives to postpone the declaration of default as much as possible(Ambrosanio et al, 2016;Person, 2021); second, several municipalities avoid insolvency thanks to massive cash advances(Raffer & Padovani, 2019); nally, Italian municipalities have experienced long bail-out history by resorting on massive central government transfers to avoid bankruptcy(Raffer & Padovani, 2019). For these reasons not falling into these insolvency regimes does not guarantee that a municipality is not in nancial distress conditions (see Appendix A for more details about the legal de nition of the cases of nancial distress of local governments provided by Italian legislation).…”

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The Determinants of the Financial Distress of Italian Municipalities: How Much Is It Due to Inadequate Resources?

Padovani,

Porcelli,

Zanardi

2023

Preprint

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The key question of this paper is whether the conditions of financial distress recently experienced by Italian municipalities can be at least partially imputed to the inadequacy of financial resources some municipalities suffer compared to the needs of their populations and territories. Starting from a multidimensional definition of financial distress, we investigate this issue by exploiting the new mechanism of equalization transfers recently implemented in Italy at municipal level which provides an exogenous measure of the resource gap possibly suffered by each municipality compared to their needs assessed on a standardized basis. The estimation results show that the Italian municipalities suffering from a level of resources below what is necessary to provide public services at standard levels are, ceteris paribus, more prone to run into financial difficulties. By the same token, large cuts in central government transfers have a statistically significant effect on financial vulnerability at municipal level. JEL: H70, H72, H77

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Section: Introductionmentioning

confidence: 99%

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confidence: 99%

The Determinants of the Financial Distress of Italian Municipalities: How Much Is It Due to Inadequate Resources?

Padovani,

Porcelli,

Zanardi

2023

Preprint

View full text Add to dashboard Cite

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The determinants of the financial distress of Italian municipalities: How much is it due to inadequate resources?

Padovani,

Porcelli,

Zanardi

2024

Int Tax Public Finance

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The key question addressed in this work is whether financial distress recently experienced by several Italian municipalities can be at least partially imputed to the inadequacy of the financial resources they suffer compared to the needs of their populations and their territories. Starting from a multidimensional definition of financial distress, we investigate this issue by exploiting the variability across municipalities revealed by two different occurrences recently involving the intergovernmental fiscal relations in Italy: on the one hand, the large cuts in vertical transfers carried out by the central government as part of the fiscal consolidation strategy in the period 2014–2015 which affected single municipalities to varying degrees; and, on the other hand, the introduction of a new mechanism of equalization transfers at municipal level which showed how the gap between available financial resources to local needs is differentiated across municipalities. Exploiting these sources of variability across local authorities, the estimation results show that the Italian municipalities which suffer a level of resources lower than that necessary to provide public services at a standard level are, ceteris paribus, more likely to run into financial difficulties. By the same token, large cuts in central government transfers have a statistically significant effect on financial vulnerability at municipal level.

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Municipalities and Excessive Debt: Local Insolvency Regimes as an Alternative to Bailouts?

Cited by 2 publications

References 14 publications

The Determinants of the Financial Distress of Italian Municipalities: How Much Is It Due to Inadequate Resources?

The Determinants of the Financial Distress of Italian Municipalities: How Much Is It Due to Inadequate Resources?

The determinants of the financial distress of Italian municipalities: How much is it due to inadequate resources?

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