The Determinants of Regional Spending for Heritage Conservation and Valorization in Sicily

The determinants of regional spending for heritage conservation and valorization in Sicily

Calogero Guccio and Isidoro Mazza*

Prepared for the 14th International Conference on Cultural Economics

ABSTRACT. The political economic analysis has developed an extensive theoretical literature framework that has been applied with favorable empirical support in many economic sectors experiencing public activities. It is therefore surprising to notice the lack of investigation about the political determinants of cultural policies. This study intends to contribute to the analysis of the supply side, by investigating the impact of political goals in the distribution of regional funds of Sicily to the Provincial Boards for Culture (PBCs) which are agencies of the regional government. We find empirical evidence that the allocation of resources among the PBCs is influenced by political objectives.

* Guccio: Università Mediterranea di Reggio Calabria, Dipartimento di Scienze Storiche, Giuridiche, Economiche e Sociali, via T. Campanella, 38/A – 89100 Reggio Calabria ([email protected]). Mazza: Università di Catania, Dipartimento di Economia e Metodi Quantitativi, Corso Italia 55, 95129 Catania (e-mail: [email protected]). The authors wish to thank M. Cavalieri, J. Fernandez Blanco, V. Ginsburgh, A. Mignosa, D. Treutlein for very helpful comments and suggestions. The usual disclaimer applies. 2 1. Introduction

Public provision of cultural goods and services represents a controversial matter for various reasons. First, there exists a variegated and extensive private supply of arts and activities aiming at the conservation and valorization of cultural heritage. Second, the definition of goals, limits and features of intervention is often confined to the subjective decisions of experts. Third, we observe remarkable differences across countries in the extent of public expenditure and regulation; differences that tend to persist also against the wide and fast spreading of privatization. Fourth, cultural policies often seem to satisfy wants of elites more than the majority of taxpayers. All these issues raise some doubts about the needs of a public involvement in the cultural sector.1 Hence one can hardly be surprised by the existence of a thorough investigation of the theoretical justifications for public intervention in favor of the arts and culture.2 Furthermore, in line with a normative approach guided by the concepts of efficiency and equity, numerous examples of intervention have been confronted with estimates of the demand, mainly based on the contingent valuation method.3 However, the issues mentioned above weaken the efficiency and equity justifications for cultural policies. In these cases, an investigation of the processes of public decision making and policy implementation could be very useful in improving our understanding of specific outcomes in the cultural sector. This paper aims at contributing to the political economic analysis of cultural policies. In particular, we investigate the allocation of regional funds for the administration of cultural heritage in Sicily. Sicily has a unique comprehensive autonomy within the national scenario, in this matter: the state authority concerning libraries, heritage, art, museums and the safeguarding of the landscape is fully delegated to the regional legislator. Within Sicily, Provincial Boards for Culture (PBCs) of the regional government, denominated Soprintendenze, are responsible for all the policies concerning the activities of information, conservation and valorization of the cultural heritage of a specific province. The PBCs are financed through the discretional assignment of regional resources by the Assessorato Regionale ai Beni Culturali, Ambientali ed alla Pubblica Istruzione. Until now, very little has been understood 1 For a rather intense expression of this discontent, see Richman and Boaz (2003). 2 Excellent surveys are provided by Throsby (1994), Blaug (2001) e Towse (2003). 3 See Cuccia (2003)

3 about the determinants of these assignments. Previous studies suggest that they may not be inherently consistent with fundamental economic principles [Rizzo and Towse (2002)]. In this study, we show some evidence that the allocation of resources among the PBCs is affected by political goals. In particular, we find that the allocation of regional grants to PBCs is influenced by the number of majority representatives elected in the territory of the recipient agency and by the presence of the president and of the head of the agency in that territory. The results also show that parties in the coalition may choose different electoral strategies in the allocation of the grants. These and other results we obtain are confronted with the main findings of the theoretical and empirical literature on the political economy of grants.4 The paper is organized in the following way. In the second section, we emphasize the relevance of the public choice approach for the analysis of the cultural policy. In the third section, we offer a brief survey of the main issues and results of the literature on the political economy of grant allocation. The fourth section describes the organization of the administration of cultural heritage, the financial transfers and the political scenario in Sicily. The fifth section presents the descriptive statistics and the econometric specification of the model investigating the determinants of the allocation of regional funds to the PBCs of Sicily. The sixth section concludes the study with a discussion of results and few final remarks.

2. The political economy of public support of arts and culture

Government spending has substantially expanded in many industrialized countries after the last world conflict. Even though the rate of growth has slowed down in the last decade, due to a widespread tendency to the reduction of welfare systems and privatization, the share of public expenditure stays well above 45% of GDP in many industrialized countries, including most of the EU-15 members.5 This extensive public involvement in the economy obviously has a considerable influence on the redistribution of wealth. And redistribution calls forth politics.

4 This literature refers generally to intergovernmental grants, although transfers to local agencies are occasionally considered [an example is Hird (1991)]. Our paper deals with a similar issue since it considers the transfers assigned to agencies with specific territorial boundaries that coincide with those of a regional province. 5 Latest data referring to 2002 [see Tanzi and Schucknecht (2005)].

4 A large literature has investigated how political decisionmakers may profit, in political terms, by defining redistributive programs that benefit not a majority of people but just restricted groups of beneficiaries. The political economic analysis has developed a rather sophisticated theoretical framework that has been applied with favorable empirical support in many economic sectors experiencing public activities.6 It is therefore surprising to notice the lack of investigation about the political determinants of cultural policies. An important reason may be that arts and culture account for a very thin share of total public expenditure in some countries, particularly in the US, and have therefore a marginal relevance as instrument of redistribution. However, many European countries assign a relevant share of public resources to the cultural sector, partly for the development of cultural capital, partly for the preservation of their patrimony, and partly for the economic benefits of valorization, for example in terms of larger inflows of tourists. Moreover, cultural policies have characteristics that may easily transform them into special interest politics. In particular, the largely discretionary power of experts and bureaucrats to define what kind of art deserves public support gives them a role of gatekeepers of the market and allows them to assign rents to those artists lucky enough to see their art financed or bought by public institutions [Grampp (1989), Mossetto (1994)]. And the potential assignment of rents may induce rent-seeking contests. A similar phenomenon may take place in urban planning, where the restoration and/or valorization of historic centers may have redistributive effects in favor of those who have properties or run business in that area [Mazza and Rizzo (2001)]. In order to limit the extent of the discretionary power of the experts and to reconcile cultural policies with the preferences of the collectivity, some scholars suggest the adoption of referenda [Frey and Oberholzer-Gee(1998);Frey and Pommerehne (1995)] and/or the inclusion of cultural organization representatives in the public boards [Peacock (1994, 1998)]. These remedies are partly criticized by Mazza (2003) who also suggests to consider encompassing solutions for the political accountability problem that concerns, with various intensity, all sectors experiencing public intervention. However, although cultural policies are likely to be interpreted more extensively under a political economic approach, very little empirical analysis has been carried on to support this thesis. In particular, we would need more evidence of lobbying

6 For a review of political economy theory see, among others, Mueller (2003), Drazen (2000), Persson e Tabellini (2000).

5 activities, on the demand side, and of public policies responding to political incentives, on the supply side. This study contributes to the analysis of the supply side, by investigating the impact of political goals in the distribution of regional resources to provincial agencies for cultural policies in Sicily.

3. The politics of the grants

The analysis of the economic links between governments of different levels has a central position in the literature on fiscal federalism. The recent phenomena of political fragmentation experienced in the East Europe, the processes of decentralization involving many economies around the world and the obstacles to the transformation of the EU into a political (con)federation have raised a lively debate on the risks of administrative centralization and the benefits, especially in terms of efficiency, that can be obtained by strengthening the autonomy of local jurisdictions. As for the decentralization of public intervention for cultural goods, the discussion has mainly centered on efficiency issues such as the choice of the public functions to decentralize and the extent of decentralization7 The outcome of decentralization depends heavily on the characteristics of intergovernmental grants. Traditional public finance explanations are: the internalization of externalities caused by fiscal competition or local public good spillovers; the assurance that adequate and comparable standards in the provision of local public goods and services are attained in the whole national territory; inter- jurisdictional equity goals; the stabilization of local economies hit by negative economic shocks. However, the choices regarding the type and the allocation of grants often do not seem to follow the prescriptions of the theory. This relatively poor explanatory power of the traditional analysis should not be surprising, since it often assumes a government maximizing the public interest. However, as Inman and Rubinfeld (1996) warn, it remains to verify "whether the central government itself will select socially preferred policies" (p.325). In line with a “second generation economic theory of federalism” [Qian and Weingast (1997, p.84)], having a specific focus on the political economic analysis [Oates (2004)], a substantial amount of empirical studies conducted in different

7 In Italy, after the recent constitutional transformation, the only functions to be still centralized are those of preservation of cultural heritage and coordination among the regional cultural policies. For an analytical examination of the pros and cons of decentralization of cultural policies see Galeotti e Tabellini (1996), Forte (1997), Mazza e Rizzo (2000).

6 countries (under a variety of institutional settings) suggest that the decisions concerning the distribution of intergovernmental grants are indeed influenced also by the fulfillment of political objectives. Since grants for local projects are typically discretionary and well perceived by the electorate there is a legitimate suspicion that they can represent pork-barrel spending.8 Namely, legislators may use collective resources for financing projects with geographically concentrated benefits in order to enhance political consensus and thus the probability of reelection.9 Many studies that have investigated the impact of political variables in the allocation and magnitude of intergovernmental grants in several countries.10 It is somewhat striking that this literature consistently validates the hypotheses of political determinants, in a large variety of institutional contexts and grant types. It is also shown that efficiency and equity may as well play a substantial role in the decision regarding the assignment of grant. On the contrary, there are conflicting findings about the strategy of maximization of political support that the grant allocations would reveal. Special interest politics, or ‘tactical’ redistribution as defined by Dixit and Londregan (1996) has been investigated in detail by several theoretical models based on various hypotheses concerning different aspects of the political decision-making process. Since politicians are assumed to be seeking their reelection, it is common to consider a policy as the optimal strategy selected by a unitary agent, either the incumbent legislator (or government) or the ruling party, in an electoral game played against the opponent(s). Assuming uncertainty of the candidates about voting behavior, there are two conflicting theories about the optimal strategy of the ruling political actor. Some authors [Lindbeck and Weibull (1987), Dixit and Londregan (1995)] suggest policies will be biased in favor of the groups that are less ideologically motivated and therefore easier to be ‘bought’ by redistributive programs favoring them (‘swing voters’). Clearly election rules do play a role. With majoritarian elections, a party tends to use resources to maximize the number of seats more than the number of

8 There are several definitions of pork (see Hird, 1991). Here we refer mainly to allocative pork, taking place when the government or certain legislators with a particular institutional position, allocate general revenue to specific districts, such as those of their constituencies. Programmatic pork instead refers to general expenditure programs financed by the government with the main objective of gratifying the electorate. 9 Levitt and Snyder (1997) examine district-level spending data referring to US federal assistance programs from 1983 to 1990 and estimate that additional 100 $ per capita in spending translated into a 2 percent increase in popular vote for the incumbent representative. 10 For references, see Horiuchi and Lee (2004) and Guccio and Mazza (2005).

7 votes. Then, the government prefers to direct resources to those ‘swing’ district where a competitive race is anticipated more than to safe districts. There are several papers supporting the hypothesis that grants are allocated to swing jurisdictions.11 Case (2001) ascertains that, in the period 1992-1996, more social assistance funds were allocated by the Albanian central government to the swing and pivotal communes, where the latter are identified as those whose support is almost essential to win a majority of seats. Johansson (2003), using data on 255 Swedish municipalities for the years 1981-1995, find that municipalities with more swing voters receive relatively larger grants [see also Dahlberg e Johansson (2002)]. Khemani (2003) observes that transfers for state development plans in India, over the period 1972-1995, are higher to states politically affiliated with the central government but where the national ruling party controls a smaller proportion of seats.12 An alternative hypothesis is that pork barrel programs will be chosen to reward the loyal supporters of the government. According to Cox and Mc Cubbins (1986), risk- averse legislators loyal voters redistribute to reward the constituency with the highest expected electoral rate of return and these are the core supporters that supply less uncertainty about voting behavior. Alperovich (1984) finds that in 1976 (when the Labor party formed the national government) and in 1978 (when the Likud party formed the national government), the distribution of general grants was positively influenced by the political orientation of the population in favor of the ruling party. Ansolabehere e Snyder (2003), after examining the distribution of funds within the US states from 1957 to 1997, do not find significant evidence that the ruling party in a state redistribute in favor of districts with a high percentage of swing voters; however, they find that more transfers are allocated to those districts which offer more votes to that party. Grossman (1994) finds that that the percentage of state seats held by the party having a majority in the House of Representatives (Democrats) had a positive and significant impact on total federal grants to the state in the years 1974, 1977, 1980, whereas the effect was positive but not significant in 1983. An assessment of the previous models in terms of party discipline would suggest that pork barrel in

11 From an empirical point of view, there is no unique benchmark defining a swing district. This definition is additionally complicated by the overlapping influence of local and national elections [see John and Ward (2001)]. 12 Additional support for the swing voter hypothesis regarding the allocation of intergovernmental grants are provided by Chandler (2004) for Lituania and by Dasgupta et al. (2004) for India.

8 favor of swing districts reflects a strong discipline of the party, while redistribution to loyal districts shows internal weak discipline. A related class of models gives a special emphasis to the role of interest group in the electoral contest. Lowry and Potoski (2004) estimate the influence of three types of organized interests, tax-exempt organizations, private establishments and municipal governments, on the allocation of discretionary federal grants to US states in seven policy areas (including arts and culture) between 1991 and 1998. They find that at least one organized interest variable has significant positive influence in all areas. Finally, relaxing the assumption of a unitary political actor and focusing on post- election politics, other models analyze the bargaining of parties or single representatives in the formation of a coalition that agrees on a specific program. According to this perspective, redistributive policies would be instrumental to strengthen the cohesion of the government coalition. Milligan and Smart (2005) investigate the influence of economic and political factors on the allocation of regional development grants made by two agencies, the Atlantic Canada Opportunities Agency and the Economic Development Agency of Canada, to the five poorest provinces in Canada, from 1988 to 2001. They find that government spending is positively related to party affiliations and electoral competitiveness but negatively to tenure. The authors show that these results are consistent with a bargaining model based on Baron and Ferejohn (1989), where more resources are assigned to swing districts and to those party members that value their seats more, namely the legislators with shorter tenure, whereas the senior legislators are rewarded with off-budget political favors. Lee (1998, 2000) obtains a support for the hypothesis that grants are consistent to an efficient process of coalition building. The existence of an equal number of members per state in the US senate should suggest that small states are courted by coalition builders because they can be rewarded with a lower assignment of resources than populous states. Accordingly, Lee (1998) finds that small states get a disproportionate amount of federal funds and that their senators have a larger influence than the senators of large states in the definition of policies [see also Lee (2000)].

9 4. Financial and political aspects of cultural heritage policy

4.1 Organization and institutions in the Sicilian Region

The literature shortly reviewed in section 3 is an important reference for any analysis of the determinants of public grants. The Sicilian Region, because of its ‘Special Statute’,13 has complete autonomy concerning libraries, the preservation and valorization of cultural and artistic heritage, museums and safeguard of landscape, and it represents the most advanced example of decisional decentralization of policies for cultural matters in Italy. Nonetheless, the Sicilian administrative organization appears to be rather centralized, mainly with regard to its financial choices (Mignosa 2002). Only few studies have examined the financing of the PBCs, or Soprintendenze per i Beni culturali, and tried to identify its main determinants. Rizzo and Towse (2002) indicate that funds do not seem to be fully justified in terms of efficiency. That research argues that transfers may also be influenced by political factors. The main objective of this paper is to verify this hypothesis. Before presenting the estimated models, it is useful to provide some information on the organization and finance of cultural goods in Sicily.

The institution at the top of the regional administration is the Regional Office for Culture and Education – Assessorato Regionale Beni Culturali, Ambientali ed Educazione Permanente. This is the institution responsible for cultural policy administration and operates through the Dipartimento dei Beni culturali, ambientali e dell’Educazione permanente. The Assessorato, formulates regional cultural policies, controls the local institutions that manage arts and heritage, and decides on the distribution of funds among them. It presides over the activity of all the different subordinate bureaus (see chart 1). Among these offices, the PBCs are the bodies responsible for the implementation of cultural policies within the territorial boundaries of a specific province. Each of them is responsible by law for the activities necessary to safeguard the cultural heritage of that specific province.14 Every bureau comprises different operational units that cover 13 The Regional Statute assigns to the Sicilian government exclusive legislative power on ‘tourism, (…), preservation of the landscape and conservation of antiquities and arts’ (art.14 n). It also considers cultural heritage as ‘part of the non-disposable patrimony of the region’ (art. 33). Transfer of authority on arts and culture to the region effectively took place in 1975 when the National Government delegated power on cultural matters to the Sicilian government with two Decrees of the President of the Republic (no. 635 and 637). Following devolution, regional laws have shaped the present Sicilian system. 14 The Sicilian Region is divided into nine provinces.

10 the different aspects of art and heritage preservation (archaeology, art history and so on) and of administrative matters (for instance, personnel) [see Rizzo and Towse (2002)].

Chart 1 Organisation of the administration of cultural heritage in Sicily

Assessorato dei Beni culturali Ambientali e della Educazione Permanente Sicilian Regional Office for Culture and Education

Dipartim ento Regionale Beni Culturali Ambientali ed Educazione Permanente Regional Department for Culture and Education

Centri Regionali e U ffici Speciali Soprintendenze Provinciali M usei e Gallerie Regionali Biblioteche Regionali Regional Centres and Special Bureaux ai BB.CC. Regional Museum s and Galleries Regional Libraries Provincial Boards for Culture Source: Mignosa (2002)

The Assessorato is the main source of income for the various local institutions, i.e., PBCs, museums and galleries, libraries and so on. Regional funds as well as those originating in the European Union and the State pass through the Assessorato, which allocates them among the subordinate cultural and local bureaus. Each year the various offices have to present a report of the activities undertaken and a plan of the activities for the following year to justify their requests for funds and to obtain them.

4.2 Measuring transfers for cultural policies Finding a suitable measure for distributive spending is controversial, due to the difficulties of separating discretional spending from productive public expenditure. In the heritage sector, there are no clearly defined criteria regulating the allocation of funds.15 It is important to notice the unavailability of precise information about the allocations assigned to each PBC. The financial accounting system employed by the Sicilian Region presents a fund including indistinctly all the transfers to the peripheral offices. This represents a serious limit of the accounting information system that prevents an exact analysis of the resources available for each expenditure unit and hinders the development of an effective system of expenditure programming and control. On the

15 For a discussion on public support to cultural activities, see Frey (2003).

11 other hand, the existence of discretionary criteria in the expenditure authorization suggests a potential influence of political variables on the financing decisions. In order to understand which factors have more influence on the allocation of resources to the PBCs, the commitments of each PBC have been utilized as a proxy for the transfers to the same PBC. In brief, we are here assuming that these commitments are a stable fraction in time of the total financial resources that each PBC obtains. A support to this approximation comes from the observation that the expenditure commitments are generally dependent on the PBC’s ability to spend the amount of money received by the Regional Office for Culture and Education. The allocation of resources results from two main decisional steps. The step is bureaucratic: a request of an amount of transfers is made to the political agents. The hypothesis of this paper is that these transfers may be identified in terms of the expenditure commitments expected for the next year. However, the information on the signal sent by the bureaucratic level is not available. The second phase is political. Any political decision on transfers is made according to the requests made at the bureaucratic level and through a bargaining process. This decision defines the total amount of funds assigned indiscriminately to all PBCs. It identifies a specific item within the budget of the Regional Office for Culture and provides the PBCs with an informal signal about the amount of the authorized expenditure commitments (the actual allocation). In our analysis, it is assumed that each PBC spends on average all the financial funds informally assigned in order not to loose them the year after.16 As already mentioned, this paper uses data on the expenditure commitments (TG) made by PBCs. The box plot of TG (log) is reported in graph 1. .

16 It is worth mentioning that the resources assigned to the PBCs do not include the expenditures for the personnel. Moreover, among the financing flows described in figure 1, an important role in the allocation of grants could be played by the regional museums which do not have allocation criteria that explicitly differ from those concerning the PBCs. In our study, we consider the allocations to the museums as the expenditure of other subjects which finance cultural projects and could eventually crowd out the PBC activity.

12 Graph 1 – Box plot of Expenditure commitments 7 1 ) g o l (

s t 6 n 1 e m t i m m o 5 c

1 e r u t i d n e 4 p 1 x E 3 1 AG CL CT EN ME PA RG SR TP

Notes: All values are converted into 1995 Euro.

From the graph, some PBCs show a high variability of their values. The data employed in the analysis do not allow, however, to consider the different endowment of cultural resources. Given the distinctiveness of the competences assigned to the PBCs in Sicily and their financial dependence on the Region it seems reasonable to assume that the financing level for the operating expenditure should be linked to the needs. The main point of reference should, thus, be the different heritage supervised by the PBCs. Due to the lack of updated information on the heritage supervised by each Board, it has been decided to make use of the census data on cultural goods presented by the Sicilian Region in 1988 [Centro Regionale per l’Inventario, la Catalogazione e la Documentazione dei Beni Culturali e Ambientali, (1988)] The box plot of this variable (log) is reported in graph 217. From the value distribution, it is evident that the scattering is quite wide, especially for some PBCs.

17 The variable transfer per heritage unit (T) is computed by dividing the amount of transfers given to a PBC (measured by the expenditure commitments) in a certain year by the physical heritage supervised by the same PBC. The variable is the following: Tit = TGit / HPBCi, where

 TGit is the total amount of funds given to PBCi in year t

 HPBCi is the total amount of cultural heritage under the jurisdiction of PBCi

13 Graph 2 – Box plot of Transfers per Heritage Unit 9 ) g o l 5 ( .

t i 8 n U

e g a 8 t i r e H

r 5 e . p 7

t r e f s a r 7 T 5 . 6

AG CL CT EN ME PA RG SR TP

Notes: All values are converted into 1995 Euro.

4.3 Electoral rules and government system There is a growing literature investigating the links between electoral systems, forms of government and levels of public expenditure [Persson and Tabellini (1999), (2001); Milesi-Ferretti et al. (2002)]. Usually, it is believed that the electoral system and the form of government are able to affect the allocation of grants and the level of public expenditure. Contrary to most empirical studies on intergovernmental grants, which refer to an electoral system adopting plurality rule, the Sicilian regional elections we consider are based on proportional representation.18 This difference in electoral systems may not be without implications for pork barrel politics. We can suppose that under proportional representation, legislators are induced to take into account the interests of the party more than of the constituency because their election depends heavily on the position the party assigns to them in its electoral list. 19 The opposite would happen under plurality or majoritarian rule, with the legislators directed to 18 Proportional representation systems are characterized by the election of multiple representatives for each district and seats are allocated to each party according to the share of the votes they receive in the election. Individual candidates gain access to seats according to their position in the party list (closed lists) or according to a mixed system that includes the position in the list and/or the votes gained by a candidate (open lists). The system employed in Sicily in the period we consider was proportional with open list. 19 In partial contrast with the general tenet that party discipline ties the hands of the legislators, Grossman and Helpman (2005) indicate that the relationship between party discipline and pork barrel spending may not be monotonic.

14 serve their constituency preferences.20 We could also expect that in multi-party systems, where no party holds a majority of the seats, party discipline is usually higher than in two-party systems, as the bargaining on bills and public projects relies on the party homogeneity and leadership and not on the political weight of a single legislator.21 Since we deal with multi-representative districts, our analysis employs a threshold based on the percentage of the party regional consensus. Those districts where the percentage of consensus is higher or equal to the regional average are considered ‘strong’, whereas the other districts are defined as ‘weak’. The hypothesis tested in this paper aims at verifying whether parties redistribute in favor of strong or weak districts. Due to the limited sample size and the wide fragmentation of the political system, only the decisions of the first two parties of the coalition are considered. Another interesting element relates to the impact of the government leaders and of the district representatives which support the government majority. The behavior of the government leaders in the analyzed context should reflect incentives coherent with the party strategies. In addition, it is expected that the concentration of representatives of the ruling party in the district should have a positive influence on the grants to the district: firstly, because elected representatives are expected to vote policies in favor of their district; secondly, because a party that wishes to reward its representative would find efficient to concentrate the allocation of funds to those districts where more party members have been elected. However, the fact that we are considering one only one type of grants, namely those for cultural activities, may produce opposite results. In fact, if each elected representative is politically linked to a specific public service (water supply, education, cultural heritage, transportation,…) he or she will compete with the others to attract more resources in his or her specific area of interest. Therefore, a higher concentration of representatives of the ruling party may imply

20 Stratmann and Baur (2002) examine the allocations of seats on committees in Germany, where legislators elected under both electoral systems coexist. They consider three legislatures between 1990 and 2002 and find support for the previous hypothesis by observing a significant difference in committee memberships between the political representatives elected under plurality system, who tend to seat in committees that allow them to serve their local constituency, and the representatives elected under proportional rule, who instead are member of committees better serving the national support for their party. 21 Institutional rules also play an important role. For example, Canada and the US have both a majoritarian system but, while in the former country parties’ discipline is reputed to be high, the opposite is true for the latter. McGillivray (1997) shows how the party discipline explain different trade protections across industries in these two countries.

15 more total transfers to the district but less resources for each sector of public expenditure. Also seniority may have an influence on the allocation of grants. More senior representatives are less subject to the party discipline than their colleagues and are then able to address resources to their district independently from the superior strategy of the party. Moreover, seniority reinforces the ‘contract’ that legislators may have with local interest groups. Since these contracts are not enforceable, lobbies will prefer to deal with well known representatives because they are more trustworthy than newcomers. And if interest groups have an influence in the outcome of elections, the representatives will find less resistance from the party to support their district, and especially the interest located there.22 Another element to take into consideration is the conflict level of the political system and the effects in term of number of government in the legislature.

5. Summary statistics and econometric specification

The variables used in this analysis concern the years 1992-2000 and include the expenditure commitments and new expenditure of PBCs, the number of PBC employees, the provincial income, the resident population and tourism inflows, as well as a number of political variables that will be explained and considered subsequently.23 For each variable and for the whole period of time employed in the analysis, table 1 presents the mean, the standard deviation and the minimum and maximum values. The objective of the present work is to use the data collected to verify the influence of political factors on the resource allocative decisions at a PBC level. As seen before, the literature tends to assume that a winning party or party coalition in a legislature acts as a unitary actor and has authority and capability to manipulate distributive policy in order to maximize the number of seats or the probability of keeping the majority of seats in a legislature. However, it is also argued that the

22 Holcombe and Zardokoohi A. (1981) find that the allocation US federal grants in 1976, was significantly higher in those states with more seniority in the Senate and with a larger percentage of House members of the majority party. On the contrary Milligan and Smart (2005) find a negative relationship between grants and tenure in the allocation of spending to districts in Canada. 23 The allocation of funds and expenditure were computed on the basis of elementary information provided by the Budget and Finance Regional Office. Data relative to the provincial income were estimated using historical series of the provincial added value elaborated by the Tagliacarne Institute. Data on the provincial resident population is provided by the ISTAT. The financial variables are expressed in 1995 constant prices. Other data are provided by the ISTAT.

16 allocation of a larger amount of grants to districts with many “swing” voters, or “marginal” districts is a symptom of party’s discipline, whereas redistribution in favor of “loyal” districts would show weak discipline within the party. In the context here examined, it has been assumed that the behavior of the individual politician, the majority party and the representatives of the majority elected in the district can all affect the allocation of transfers. We also focus on the possible influence of lobbying by members of the parliament: a district which elects relatively more MPRSs from the ruling party should get higher discretionary grants.

Table 1 - Descriptive statistics of the variables employed

Variables Meaning Mean Std. Dev. Min Max

Expenditure commitments in Euro TG 5,374,933.00 3,740,078.00 912,120.90 17,600,000.00 (1995 constant prices) H Total amount of heritage per PBC 2,225.33 1,208.34 968.00 5,145.00 T TG/Heritage 2,500.14 1,254.74 634.71 6,890.06 PERS Number of personnel unit 241.10 107.74 62.00 476.00 TOURISM Number of tourist stay per district 1,136,705.00 1,028,111.00 91,374.00 3,903,703.00 POP Population per district (thousand) 566.36 351.26 181.00 1,243.30 Per capita district income in Euro INCOM 9,271.79 1,167.11 7,336.01 11,475.30 (1995 constant prices) DENS District population density (km2) 186.86 63.88 70.64 310.22 PR Dummy for the President’s district 0.11 0.32 0.00 1.00 PR_OLD President’s seniority 1.21 4.00 0.00 18.00 Dummy for the district of the Head AS 0.11 0.32 0.00 1.00 of the regional office Seniority of the Head of the AS_OLD regional office 1.20 4.55 0.00 24.00 Number of majority members in SEATS 6.47 3.93 1.00 14.00 the district FIRST_P Dummy for swing of the 1st party 0.20 0.40 0.00 1.00 SECOND_P Dummy for swing of the 2nd party 0.16 0.37 0.00 1.00

Following main literature the general regression model is

Tit = Pit-1 + Oit + i + t + it [1]

where i refers to each PBC; t refers to the year; T stands for unit of heritage transfers; P is a matrix of political variables; O is a matrix of other control variables;  and  are

17 vectors of district and year dummies;  are disturbance terms. The vector  includes the parameters that measure the effects of the political variable. The vector  contains the parameters that measure the effects of the exogenous variables. It is important to point out that there is a lag between the decision transfer and the time of the expenditure commitment. This is relevant when estimating the effect of particular institutional and political variables, since current commitments have normally been appropriated in previous budgetary years. Delays should therefore be taken into account. Hence, we introduce lagged values for Pi, since past policy makers are responsible for current expenditure commitments. Equation [3] is estimated using fixed-effects model and the random-effects model (GLS). All specifications are in real terms (in constant prices of 1995).

6. Discussion on results and concluding remarks

In tables 2 and 3 we have run panel data random-effects model (GLS) and fixed- effects model. Data refer to nine PBCs for the period 1992-2000, thus the model uses a combination of time series and cross section data for a total of 81 observations. The functional form adopted is the log-log, including dummy variables. As for the different estimate techniques used to verify the casualty of time and the individual effects we have used Lagrange and Hausman tests on fixed effects [Wooldridge (2002), Greene (2003)] The results of the tests show a preference for the estimate with fixed effects. The hypothesis we intend to test are the following: - H1: more funds are destined to the districts corresponding to the constituency of the political decision-maker; - H2: H1 depends on the tenure of the political decision-maker; - H3: districts with a higher number of representatives of the majority obtain a higher amount of resources; - H4: main two parties in the majority target either swing or loyal voters. These hypothesis do not conflict and, therefore, can be tested simultaneously. The only estimate that has to be made separately is that related to the variables PR, AS, PR_OLD and AS_OLD, given the way these variables have been set. Moreover, we decided to use a parsimonious model in order to evaluate the marginal effects. For this

18 reason there are four estimates in the tables. Although the results are still preliminary, they appear to be encouraging.

Table 2 – Fixed effect regression (1) (2) (3) (4) (5) ln_T ln_T ln_T ln_T Ln_T PR 0.164 0.140 (0.118) (0.113) AS 0.069 0.085 (0.115) (0.110) PR_OLD 0.008 0.008 (0.010) (0.010) AS_OLD 0.016* 0.014* (0.008) (0.008) SEATS (log) 0.102 0.090 0.084 (0.125) (0.126) (0.124) FIRST_P -0.267* -0.260* -0.237* (0.134) (0.134) (0.133) SECOND_P 0.399** 0.399** 0.406** (0.163) (0.164) (0.161) POP (log) -10.967 -12.819 -7.247 -8.551 -9.794 (10.731) (10.652) (10.228) (10.270) (10.219) INCOM (log) 1.279 1.209 2.170* 2.076 1.979 (1.252) (1.234) (1.249) (1.250) (1.238) DENS (log) 21.921* 22.948* 13.864 15.517 16.507 (12.653) (12.544) (12.283) (12.322) (12.251) TOURISM (log) -1.430*** -1.317*** -1.227*** -1.242*** -1.147*** (0.208) (0.212) (0.246) (0.249) (0.247) PERS (log) 0.355** 0.379** 0.370** 0.389** 0.400** (0.158) (0.155) (0.155) (0.156) (0.154)

Constant YES YES YES YES YES PBC fixed effect YES YES YES YES YES Year fixed effect YES YES YES YES YES

Observations 81 81 81 81 81 Number of PBC 9 9 9 9 9 Number of year 9 9 9 9 9 R-squared 0.57 0.58 0.62 0.63 0.64 Standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1%

As for hypotheses H1 and H2, the signs of the political variables indicate a positive influence on the political decision-maker by his/her own constituency though these variables are not significant in the model with fixed effects. Also the tenure variable shows a positive effect. More specifically, a longer term as head of the regional office for culture has a positive and significant impact on the amount of funds destined to a PBC. Hypothesis H3, about the ability of the deputies of the majority to exert pressure in favor of their constituency has a positive sign, as expected, though it is not significant. We find interesting results concerning the strategy of the political parties.

19 Table 3 – Random effect regression (GLS)

(1) (2) (3) (4) (5) ln_T ln_T ln_T ln_T Ln_T PR 0.239* 0.156 (0.141) (0.119) AS 0.135 0.198* (0.132) (0.115) PR_OLD 0.022* 0.015 (0.012) (0.010) AS_OLD 0.026*** 0.022*** (0.009) (0.008) SEATS (log) 0.263*** 0.268*** 0.232*** (0.091) (0.092) (0.089) FIRST_P -0.405*** -0.359*** -0.322*** (0.120) (0.120) (0.118) SECOND_P 0.531*** 0.554*** 0.546*** (0.133) (0.131) (0.127) POP (log) -0.618*** -0.729*** -0.650*** -0.649*** -0.690*** (0.193) (0.190) (0.196) (0.193) (0.188) INCOM (log) 0.460 -0.071 2.181*** 2.102*** 1.669*** (0.496) (0.515) (0.555) (0.546) (0.562) DENS (log) 0.880*** 0.941*** 1.044*** 1.047*** 1.068*** (0.270) (0.262) (0.252) (0.253) (0.244) TOURISM (log) -0.327*** -0.268*** -0.491*** -0.506*** -0.465*** (0.103) (0.096) (0.099) (0.101) (0.096) PERS (log) 0.922*** 0.838*** 0.779*** 0.766*** 0.723*** (0.124) (0.123) (0.109) (0.107) (0.106)

Constant YES YES YES YES YES

Observations 81 81 81 81 81 Number of PBC 9 9 9 9 9 Number of year 9 9 9 9 9

R-squared 0.51 0.55 0.66 0.68 0.70

Hausman 0.93 1.21 1.17 0.97 1.43 Prob>chi2 (0.004) (0.002) (0.002) (0.004) (0.002) Standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1%

The behavior of the first two parties of the majority coalition seems to be different. The party of relative majority [Christian Democrats (DC)] seems to follow a ‘loyal strategy’, namely FIRST_P has a negative sign, with the objective of maintaining and strengthening its electoral position, whereas the second party of the majority follows a more aggressive ‘swing strategy’, namely SECOND_P has a positive sign. It is interesting to notice how this behavior has been constantly confirmed by the data. This is true despite in the period analyzed there has been a high variability in the political context with the disappearance of some political parties as the DC and the

20 Socialists (PSI) which were present in the first period considered. New political subjects have also appeared and their territorial electoral basis do not correspond to those of previous parties. Finally, in the period under consideration there has been a shift in the majority. All these elements suggest that in a coalition government parties have a different behavior. More specifically the party of relative majority would adopt a strategy aiming at defending the position attained, whereas the other parties would be free to follow more aggressive strategies aiming at capturing consensus. These hypothesis, however, need a deeper analysis, also including more general grants than these studied here. As for the other dependent variables present in the estimated models, their signs follow the expectations. A rather surprising result is given by the variable TOURISM that indicates a negative and significant relationship between transfers of funds and tourist presence in the various areas. The result may be affected by a different distribution of infrastructures for tourism in the region. However, results do not change looking at the number of tourist arrivals. The data about the personnel influences positively the commitment. As the data about commitment does not include expenditure for the personnel, the value of the coefficient can be considered as representing the capacity of the bigger bureaucratic structures to obtain more funds. This study represents a first attempt to investigate the impact of political variables and strategies on public expenditure for culture and arts. The preliminary results show the relevance of political variables on the assignment of culture specific transfers to a regional province. In particular, the number of majority representatives in the province, the presence of the president constituency and the seniority of the head of the regional office show to have an impact. As the strategies followed by the parties in the coalition it is interesting to notice that different strategies appear to be followed by the first party and the second one.

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