Federalism, Party Competition and Public Expenditure: Empirical Findings on Regional Health Expenditure in Italy

Since the ‘90s, Italy has experienced a considerable decentralization of functions to the regions. This transformation has been especially relevant for the National Health System that has de facto assumed a federal system design. The federal reform aimed to discipline public health expenditure that drains a substantial share of the budget of Italian regions and is among the main causes of the regional deficits. Political economic analysis, however, suggests that the impact of federalism on public expenditure depends on central and local government strategies to win the electoral competition. Results derived in this chapter indicate that political competition actually works as a tool of fiscal discipline, as it shows a restraining effect on public health expenditure.