Budgetary solvency of Italian local governments: an assessment

Abstract

Purpose

The purpose of this paper is to investigate budgetary solvency (BS) as a part of the financial condition of local governments (LGs), considering that the growing demand for public services is primarily affecting this variable.

Design/methodology/approach

The study investigates a sample of 132 Italian LGs with more than 50,000 inhabitants for the period 2005–2014. The authors obtain a set of indicators as proxies of BS, which serve as the dependent variable of a regression model aimed at testing several independent variables which the authors are interested in, namely, financial autonomy, current equilibrium, level of indebtedness and investments.

Findings

BS, as well as its three indicators—sustainability, flexibility and vulnerability—are positively related to financial autonomy and current equilibrium and negatively related to the level of indebtedness and investments.

Practical implications

To cover citizens’ demands for public services guaranteeing sound financial management, policymakers are advised to control both the balance between current revenue and expenses and the level of indebtedness while preserving financial autonomy from external sources.

Originality/value

This study adds fresh insight to the literature on financial health, emphasising the relevance of public financial management.

Citation

Bisogno, M., Cuadrado-Ballesteros, B., Santis, S. and Citro, F. (2019), "Budgetary solvency of Italian local governments: an assessment", International Journal of Public Sector Management, Vol. 32 No. 2, pp. 122-141. https://doi.org/10.1108/IJPSM-11-2017-0328