Abstract
AbstractWhat are the effects of fiscal imbalances, and austerity, on regional-level spending? To answer this question, we examine an original dataset of yearly spending decisions of regional governments in Italy and Spain between 2003 and 2015. We find that the rise in regional deficits has an important negative effect on regional governments’ spending. The strength of this effect is, however, mitigated by the presence of a left-wing party in regional office. In addition, we uncover an important variation in the extent of cutbacks across policy sectors: regional governments tend to protect the health sector and focus their retrenchment efforts on social assistance and running of public institutions. Partisanship matters here too, as left-wing parties tend to protect healthcare more than their right-wing rivals. These findings bear relevance for understanding the role of partisanship and policy sector in the process of public retrenchment in multi-level states.
Highlights
If the responses to international economic crises are led by national governments, the consequences of those responses are felt at the regional and local levels
In a context of rising budgetary deficits, regional governments were compelled to cut back spending so that central governments could achieve their goals of fiscal consolidation (Kincaid et al 2010; Braun and Trein 2014)
This latter policy was imposed with remarkable rigour in Europe, following the eruption of the Eurozone’s sovereign debt crisis in 2010 and the introduction of austerity rules at multiple levels of authority (Caporaso et al 2015)
Summary
If the responses to international economic crises are led by national governments, the consequences of those responses are felt at the regional and local levels. Central governments’ policies for dealing with a downturn affect what sub-national governments can do for their citizens This reality was felt by European regions in the aftermath of the Great Recession that unfolded between 2008-09 and 2015. In a context of rising budgetary deficits, regional governments were compelled to cut back spending so that central governments could achieve their goals of fiscal consolidation (Kincaid et al 2010; Braun and Trein 2014) This latter policy was imposed with remarkable rigour in Europe, following the eruption of the Eurozone’s sovereign debt crisis in 2010 and the introduction of austerity rules at multiple levels of authority (Caporaso et al 2015). These rules forced members of the single currency – and their constituent parts – to engage in processes of fiscal consolidation in order to meet the imposed targets for budgetary deficits and debt
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