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We use a “natural experiment”, the fiscal adjustment of Italy in the 1990s to meet the Maastricht criteria, to test a simple model of soft budget constraint that closely resembles the intergovernmental relationships in the Italian public health care sector. We show that the link between the ex-ante financing by the Central government and the health expenditure by regions was stronger when regional expectations of future bailing outs were presumably lower. Confirming previous research, we also prove that more fiscally autonomous regions were more financially responsible and that a political “alignment” effect was present, with “friendly” regional governments controlling more expenditure than unfriendly ones. Our results suggest that, at least in Italy, bailing out expectations by regions may be the missing variable emphasised by [Culyer A.J., 1988. Health care expenditures in Canada: Myth and reality. Canadian Tax Papers, 82] for empirical models explaining health expenditure. Our results also raise some worries about the outcome of the current decentralization process in Europe. [Copyright &y& Elsevier]

Grant-making foundations are private institutions that distribute their income to deserving organisations. In the USA, they enjoy fiscal incentives, but have to comply with complex rules securing that incentives are well deserved. In contrast, European countries have an embryonic legislation. This paper investigates whether the different tax rules adopted in the USA for independent and community foundations influence the grant-making behaviour of these organisations. Our econometric investigation underlines the existence of a large heterogeneity in the activities of both types, suggesting that the introduction of new regulations could benefit from a careful analysis of the nature and the features of these organisations. [ABSTRACT FROM AUTHOR]