This paper contributes to the empirical literature on the linkages be- tween 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 Ar- eas - a group of municipalities adjacent to each other, geographically and statistically comparable, characterized by common commuting flows of the working population - during the 2002-2012 period. The attention is focused both on current and capital expenditures as well as on sev- eral spending categories. To handle endogeneity problems between pub- lic 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 effect 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 Adminis- tration & Management and Roads & Transportation have negative growth effect in southern regions.
|Titolo:||Public Finance, Government Spending and Economic Growth: The Case of Local Governments in Italy|
|Data di pubblicazione:||2020|
|Appare nelle tipologie:||7.12 Altro|