Are austerity measures really distressing? Evidence from Italy

Since 2007 financial recovery plans have been adopted by some Italian regions to contain the costs of the healthcare sector. It is legitimate to ask whether spending cuts associated with the austerity policy have had any effect on the health of the citizens. We examine the indirect impact of financial recovery plans on a broad set of health indicators, accounting for several dimensions of both physical and psychological diseases. We use an instrumental variable fixed-effects model to control for time-varying heterogeneity and to deal with the potential endogeneity of the enrolment in the austerity programme. We find that the Italian austerity policy Piano di Rientro resulted in unintended negative effects on several dimensions of health, hurting and potentially jeopardising the health of citizens.