Assessing the influence of socioeconomic drivers on Italian municipal financial destabilization

Abstract

The influence of external factors on local government finances, particularly bankruptcies, is much debated. This paper investigates the relationship between regional socioeconomic features and those Italian municipalities that have been declared ‘financially destabilized’ (i.e. bankrupt). Statistical evidence confirms that municipalities located in regions with particular socioeconomic features are less exposed to financial destabilization. An early model that attempts to predict local fiscal stress is presented.

Keywords:

• Financial destabilization
• local fiscal stress
• municipal bankruptcy
• Probit model.