NATIONAL CONTEXT AND INDIVIDUAL STRATEGIES IN LOCAL REACTIONS TO FINANCIAL CRISIS: COMPARING ITALY AND FRANCE

Context The 2008 crisis has damaged or weakened most European Local Governments (LGs)’ financial situation. The shock has been more or less intense depending on the national context and policies and on individual situations... [ view full abstract ]

Context
The 2008 crisis has damaged or weakened most European Local Governments (LGs)’ financial situation. The shock has been more or less intense depending on the national context and policies and on individual situations and strategies. Different and successive types of recovery plans, austerity measures, and institutional reforms have been implemented by States (Kickert, 2012; Schick, 2012), with several diverse effects on LGs’ situation (for example Cepiku et al., 2016). The previous situation of LGs in terms of financial autonomy, State protection or local responsibilities and actions also influenced their post crisis situation, not to mention the provision of bankruptcy in certain nations (Scorsone and Padovani, 2014).
At the individual level LGs followed different strategies to cope with the crisis and the decrease in public resources, from brutal cost cuts to more elaborated restructuring of their actions and missions even by outsourcing, from basic fiscal leverage to new strategies for enhancing revenues.
Scope
LGs show various patterns of resilience and different long term capacities to cope with other shocks or crisis. While the effects of central measures and reforms on LGs have already been studied at a macroeconomic perspective, a few attention has been given to the effects on LGs considered individually. This paper is an attempt to understand the influence of national contextual factors and individual characteristics in the LGs reaction to the 2008 crisis.
Theoretical Framework
This research locates at the intersection of two streams of research, namely the effects of the global financial crisis on LGs and the measurement of LGs’ financial health. Our conceptual framework is used to logically organize relevant literature and builds upon a qualitative research approach on management of austerity in LGs by Cepiku et al. (2015). This is then applied to our quantitative analysis of municipalities in France and Italy.
We are interested to investigate how financial health (final dependent variable) has been influenced by different arbitrages made in terms of expenditures and revenues (intermediate dependent variable) on the basis of the forces that influence LGs’ reaction to crisis. Literature singles out three different types of forces (three independent variables) that are then investigated: national institutional contextual factors, (individual) economic and social factors, and (individual) internal factors.
Method
This paper proposes a quantitative comparative study, based on an original database of French and Italian municipalities’ financial data, from 2006 to 2014 (2015 if available). We selected municipalities as they represent the first tier of LGs in both countries. Italy and France have also a high degree of comparability as they both belong to the Napoleonic administrative tradition group of countries (Ongaro, 2010).
Expected results
The expected results are twofold. First, results should shed light on the effect of institutional context and on the timing of the crisis between France and Italy. Second, results are expected to illustrate the effect of individual characteristics on reactions to crisis. For example, we expect that the levels of expertise of managers and elected representatives as well as previous financial conditions may explain different reactions to crisis.