Municipal financial vulnerability in pandemic crises: a framework for analysis

Emanuele Padovani,Liliana Pimentel,Silvia Iacuzzi,Susana Jorge

doi:10.1108/jpbafm-07-2020-0129

Abstract

PurposeThis paper explores how global pandemic crises affect the financial vulnerability of municipalities.Design/methodology/approachThis paper is developed from the relevant literature an analytical framework to examine municipal financial vulnerability before a global pandemic crisis and in its immediate aftermath by mapping and systematizing its dimensions and sources. To illustrate how it can be used and evaluate its robustness and flexibility, such a tool was applied to Portugal and Italy, two countries that particularly suffered from the Covid-19 crisis.FindingsThe application of the analytical framework has shown how financially vulnerable municipalities are to global pandemic crises. Financial vulnerability relates to issues ranging from institutional design to internal financial conditions and the perception of the capacity to cope with a crisis. Results further reveal that vulnerability has an inherent contingent nature in time and space and can lead to paradoxical outcomes.Research limitations/implicationsThis paper provides a tool that can be useful for both academic and public policy purposes, to further appreciate municipal financial vulnerability, especially during crises.Practical implicationsMunicipalities can use the framework to better manage their financial vulnerability, strengthening their anticipatory and copying capacities, while oversight authorities can use it to help municipalities become less financially vulnerable or, at least, more aware of their financial vulnerability.Originality/valueMunicipal financial vulnerability to global shocks has not been explored extensively. Also, the Covid-19 pandemic is different from previous global crises as it affected society overnight with the implementation of lockdown and social distancing measures.

Highlights

Municipalities have a direct impact on people’s life as they influence the functioning of local economies, the delivery of national governments’ policies and that of proximity services, such as public health, security and education
Even after the 2008 crisis, the literature on the public administration response to global crisis has mainly focused on public policy issues (Peters, 2011) or crisis management (Boin and Lodge, 2016), less so on how financially vulnerable municipalities are to external shocks
This paper looks at municipal financial vulnerability developing an analytical framework which takes into consideration both spatial contingencies, in terms of geography and sector, and time dynamics, as far as the speed of the pandemic and the perspective of the analysis are concerned

Summary

Introduction

Municipalities have a direct impact on people’s life as they influence the functioning of local economies, the delivery of national governments’ policies and that of proximity services, such as public health, security and education. As seen in the literature overview, the external dimension is characterized by outside forces and institutional factors (Lodge and Hood, 2012, Kuhlmann and Wollmann, 2014; Pollitt and Bouckaert, 2017) These in turn concern different administrative structures, for example the level of centralization vis a vis the level of autonomy of municipalities, as well as different fiscal rules, i.e. centrally defined policies including the structure, basis and controllability of major revenue sources, debt rules, investment guidelines, monitoring systems, tax limits, etc., which shape municipalities’ room for maneuver during a crisis (Steccolini et al, 2017). The Covid-19 pandemic led to yet another package of legislative measures, which allowed to suspend or extend limits and deadlines for the forthcoming one to two years, and to relax

Administrative

Discussion

Findings

Expenditure structure