Drivers for the financial condition of Local Government: a comparative study between Italy and Spain
DOI:
https://doi.org/10.4335/13.2.161-184(2015)Keywords:
financial condition, financial sustainability, financial health, financial indicators, local government, Spain, ItalyAbstract
This paper aims to analyse the influence of socio-economic, political and financial factors on the financial condition of Italian and Spanish local governments in a comparative approach. The research is also aimed at understanding to what extent a model for the analysis of the financial condition can be generalized to different contexts. We assume that the financial condition is a multidimensional concept, with the results highlighting that while in Spain there is a high correlation between the long term financial and short term economic situations and an indicator can combine both dimensions, in Italy both dimensions are differentiated. There are also differences in the drivers of financial sustainability in both countries.
References
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Manes Rossi, F. (2011) Analysis of solvency in Italian local Governments: the impact of Basel II., The IUP Journal of Financial Risk Management, 8(3), pp. 17-42.
Manes Rossi, F., Zito, M. & Costanzo, A. (2012) How to prevent distress in local government: a new model applied in Italy, Proceedings in ARSA-Advanced Research in Scientific Areas, 1(1), pp. 627-631.
Nasi G. & Steccolini I. (2008) Implementation of accounting reforms, Public Management Review, 10(2), pp. 175-196, doi: 10.1080/14719030801928573.
Ongaro, E. & Valotti, G. (2008) Public management reform in Italy: explaining the implementation gap, International Journal of Public Sector Management, 21(2), pp. 174-204, doi: 10.1108/09513550810855654.
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Peterson, G. (1976) Finance, In: Gorham W. & Galzer N. (eds) The Urban Predicament (Washignton, DC: The Urban Institute), pp. 35–118.
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Rivers, M. J. & Yates, B. M. (1997) City Size and Geographic Segmentation in the Municipal Bond Market, The Quarterly Review of Economics and Finance, 37(3), pp. 633-645, doi: 10.1016/S1062-9769(97)90014-4.
Rivenbark, W. C., Roenigk, D. J. & Allison, G. (2010) Conceptualizing Financial Condition in Local Government, Journal of Public Budgeting, Accounting & Financial Management, 22(2), pp. 149-177.
Skidmore M. & Scorsone, E. (2011) Causes and consequences of fiscal stress in Michigan cities, Regional Science and Urban Economics, 41(4), pp. 360–371, doi: 10.1016/j.regsciurbeco.2011.02.007.
Vicente, C., Ríos A. M. & Guillamón M. D. (2013) Voting behavior and budget stability, Revista de Contabilidad - Spanish Accounting Review, 16(1), pp. 46-52, doi: 10.1016/S1138-4891(13)70005-0.
Zafra-Gómez, J. L., López-Hernández, L. M. & Hernández-Bastida, A. (2009) Developing a Model to Measure Financial Condition in Local Government: Evaluating Service Quality and Minimizing the Effects of the Socioeconomic Environment: An Application to Spanish Municipalities, The American Review of Public Administration, 39(4), pp. 425-449, doi:10.1177/0275074008320710.
Audit Commission (2007) Use of Resources. Guidance for Councils (London: Audit Commission).
Bahl, R. & Duncombe, W. (1993) State and Local Debt Burdens in the 1980s: A Study in Contrast, Public Administration Review 53(1), pp. 31-40, doi: 10.2307/977274.
Bastida, F., Beyaert, A. & Benito, B. (2013) Electoral Cycles and Local Government Debt Management, Local Government Studies, 39(1), pp. 107-132, doi: 10.1080/03003930.2012.683861.
Bastida, F., Guillamón, Mª. D. & Benito, B. (2013) Municipal Spending in Spain: A Spatial Approach, Journal of Urban Planning and Development-ASCE, 139(2), pp. 79-93, doi: 10.1061/(ASCE)UP.1943-5444.0000138.
Benito, B. & Bastida, F. (2004) The Determinants of the municipal debt policy in Spain, Journal of Public Budgeting, Accounting & Financial Management 16(4), pp. 492-525.
Benito, B., Bastida, F. & Vicente, C. (2012) Political Budget Cycles in Local Governments, Lex Localis - Journal of Local Self-Government, 10(4), pp. 341-336, doi: 10.4335/10.4.341-361(2012).
Bléjer, M. I. & Cheasty, A. (1991) The Measurement of Fiscal Deficits: Analytical and Methodological Issues, Journal of Economic Literature, 29(4), pp. 1644-1678.
Boyne, G. A., Ashworth, R. E. & Powell, D. M. (2001) Environmental change, leadership succession and incrementalism in local government, Journal of Management Studies, 38(6), pp. 859–878, doi: 10.1111/1467-6486.00262.
Brown, K. W. (1993) The 10-Point Test of Financial Condition: Toward an Easy-to-Use Assessment Tool for Smaller Cities, Government Finance Review, 9(6), pp. 21-26.
Capalbo E. & Grossi G. (2014) Assessing the influence of socioeconomic drivers on Italian municipal financial destabilization, Public Money and Management, 34(2), pp. 107-114, doi: 10.1080/09540962.2014.887518.
Caperchione E. & Salvatori F. (2012) Rethinking the relationship between local government and financial markets, Public Money & Management, 32(1), pp. 21-25, doi: 10.1080/09540962.2012.643051.
Carmeli, A. & Cohen, A. (2001) The financial crisis of the local authorities in Israel: A resource-based analysis, Public Administration, 79(4), pp. 893–913, doi: 10.1111/1467-9299.00285.
Carmeli, A. (2007) The Effect of Fiscal Conditions of Local Government Authorities on Their Economic Development, Economic Development Quarterly, 21(1), pp. 91-98, doi: 10.1177/0891242406295521.
CICA (1997) Indicators of Government Financial Condition (Canadian Institute of Chartered Accountants, Toronto).
Cohen, S., Doumpos, M., Neofytou, E., & Zopounidis, C. (2012) Assessing financial distress where bankruptcy is not an option: An alternative approach for local municipalities, European Journal of Operational Research, 218(1), pp. 270-279, doi: 10.1016/j.ejor.2011.10.021.
Dollery, B., & Crase, L. (2006) A comparative perspective on financial sustainability in Australian local government (Armidale NSW: Centre for Local Government, School of Economics, University of New England).
García-Sánchez, I. M., Cuadrado-Ballesteros, B., Frías-Aceituno, J. V. & Mordan, N. (2012) A New Predictor of Local Financial Distress, International Journal of Public Administration, 35(11), pp. 739-748, doi: 10.1080/01900692.2012.679173.
Guillamón, D., Benito, B. & Bastida, B. (2011) Evaluación de la deuda pública local en España, Revista Española de Financiación y Contabilidad, 40(150), pp. 251-285, doi: 10.1080/02102412.2011.10779703.
Groves, S. M. & Valente, M. G. (2003) Evaluating Financial Condition: A Handbook for Local Government, 4th edition (Washington DC: International City/County Manager Association (ICMA).
Hendrick, R. (2004) Assessing and measuring the fiscal health of local government. Focus on Chicago suburban municipalities, Urban Affairs Review, 40(1), pp. 78-114, doi: 10.1177/1078087404268076.
Honadle, B. W., Costa J. M. & Cigler B. A. (2004) Fiscal Health for Local Governments (New York: Elsevier).
Hulten, C. R. & Peterson, G. E. (1984) Is the United States Underinvesting in Public Capital? The Public Capital Stock: Needs, Trends and Performance, American Economic Review, 74(2), pp. 166-173.
IPSASB (2013) Reporting on the Long-Term Sustainability of Public Finances, Recommended Practice Guideline (RPG) (New York: IFAC).
Jones, S. & Walker, G. (2007) Explanators of local government distress, Abacus, 43(3), pp. 396-418, doi: 10.1111/j.1467-6281.2007.00238.x.
Kiewiet, R. & Szalaky, K. (1996) Constitutional limitations on borrowing: An analysis of state bonded indebtedness, Journal of Law, Economics and Organization, 12(1), pp. 62-97, doi: 10.1093/oxfordjournals.jleo.a023362.
Kleine, R., Kloha, P., & Weissert, C. S. (2003) Monitoring Local Government Fiscal Health, Government Finance Review, 19(3), pp. 18-23, doi: 10.1111/j.1540-6210.2005.00456.x.
Lattin, L., Carroll, D. J. & Green, P. E. (2003) Analyzing Multivariate data (Belmonte Brooks/Cole).
Manes Rossi, F. (2011) Analysis of solvency in Italian local Governments: the impact of Basel II., The IUP Journal of Financial Risk Management, 8(3), pp. 17-42.
Manes Rossi, F., Zito, M. & Costanzo, A. (2012) How to prevent distress in local government: a new model applied in Italy, Proceedings in ARSA-Advanced Research in Scientific Areas, 1(1), pp. 627-631.
Nasi G. & Steccolini I. (2008) Implementation of accounting reforms, Public Management Review, 10(2), pp. 175-196, doi: 10.1080/14719030801928573.
Ongaro, E. & Valotti, G. (2008) Public management reform in Italy: explaining the implementation gap, International Journal of Public Sector Management, 21(2), pp. 174-204, doi: 10.1108/09513550810855654.
Peters, B. G. (2008) The Napoleonic tradition, The International Journal of Public Sector Management, 21(2), pp. 118-132, doi: 10.1108/09513550810855627.
Peterson, G. (1976) Finance, In: Gorham W. & Galzer N. (eds) The Urban Predicament (Washignton, DC: The Urban Institute), pp. 35–118.
PricewaterhouseCoopers (2006) National Financial Sustainability Study of Local Government - Commissioned by the Australian Local Government Association (Sydney: PricewaterhouseCoopers), available at: http://alga.asn.au/site/misc/alga/downloads/pwc/PwC_Report.pdf (November 6, 2006).
Rivers, M. J. & Yates, B. M. (1997) City Size and Geographic Segmentation in the Municipal Bond Market, The Quarterly Review of Economics and Finance, 37(3), pp. 633-645, doi: 10.1016/S1062-9769(97)90014-4.
Rivenbark, W. C., Roenigk, D. J. & Allison, G. (2010) Conceptualizing Financial Condition in Local Government, Journal of Public Budgeting, Accounting & Financial Management, 22(2), pp. 149-177.
Skidmore M. & Scorsone, E. (2011) Causes and consequences of fiscal stress in Michigan cities, Regional Science and Urban Economics, 41(4), pp. 360–371, doi: 10.1016/j.regsciurbeco.2011.02.007.
Vicente, C., Ríos A. M. & Guillamón M. D. (2013) Voting behavior and budget stability, Revista de Contabilidad - Spanish Accounting Review, 16(1), pp. 46-52, doi: 10.1016/S1138-4891(13)70005-0.
Zafra-Gómez, J. L., López-Hernández, L. M. & Hernández-Bastida, A. (2009) Developing a Model to Measure Financial Condition in Local Government: Evaluating Service Quality and Minimizing the Effects of the Socioeconomic Environment: An Application to Spanish Municipalities, The American Review of Public Administration, 39(4), pp. 425-449, doi:10.1177/0275074008320710.
Published
2015-04-04
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