Template-type: ReDIF-Paper 1.0
Author-Name: Agasisti, Tommaso    
Author-Email: tommaso.agasisti@polimi.it
Author-Name:  Barra,Cristian
Author-Email: cbarra@unisa.it
Author-Name: Zotti, Roberto 
Author-Email: roberto.zotti@unito.it
Author-Workplace-Name: University of Turin
Author-Workplace-Homepage: http://www.est.unito.it/
Title:Public Finance, Government Spending and Economic Growth: The Case of Local Governments in Italy.
Abstract:This paper contributes to the empirical literature on the linkages between decentralized government 
spending, public finances, and economic growth at the local level. The impact of local government spending on
output growth is estimated using a panel of Italian Labor Market Areas - a group of municipalities adjacent to 
each other, geographically and statistically comparable, characterized by common commuting ows of the working 
population - during the 2002-2012 period. The attention is focused both on current and capital expenditures as 
well as on several spending categories. To handle endogeneity problems between public spending and economic 
development, a system generalized method of moments has been used. The findings indicate a fairly robust negative
relationship between local current government expenditure and economic growth. Investment in capital budget turns 
out to be not statistically significant when the public spending composition is taken into account.
Municipalities located in central-southern regions show, instead, negative growth eect of capital spending, 
underlining the importance of measuring the efficiency of public spending rather than just being concerned with the
absolute level of output. Only few of the expenditure categories (Justice, Tourism and Culture) exhibit positive effects 
on growth, while Administration & Management and Roads & Transportation have negative growth effect in southern regions.
Length: pages 55
Creation-Date: 2020-10
File-URL: https://www.est.unito.it/do/home.pl/Download?doc=/allegati/wp2020dip/wp_22_2020.pdf
File-Format: Application/PDF
Handle: RePEc:uto:dipeco:202022