Article(print)2002

A Comparative Test of Alternative Theories of the Determinants of Italian Public Deficits (1950-1998)

In: Public choice, Volume 113, Issue 1-2, p. 37-58

Galli, Emma; Padovano, Fabio

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Abstract

The paper assesses the relative explanatory power of the Keynesian, the optimal finance, the contingent liability, & several public choice theories of the determinants of public deficits on Italian 1950-1998 data. A vector error correction model suggests that deficits are sensitive to unemployment levels, interest groups' preferences (especially the elderly), government fragmentation, changes in the degree of stringency of budget rules, & external economic constraints. Data instead provide a weak or no support to the hypotheses that deficits respond to output growth & electoral events. The implications of the optimal finance & of the contingent liability theory are rejected as well. 4 Tables, 1 Appendix, 29 References. Adapted from the source document.

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