Government late payments: the effect on the Italian economy. Research Team. Prof. Franco Fiordelisi (coordinator)

Transcription

1 Governmen lae paymens: he effe on he Ialian eonomy Researh Team Prof. Frano Fiordelisi (oordinaor) Universià degli sudi di Roma Tre, Ialy Bangor Business Shool, Bangor Universiy, U.K. Dr. Davide Mare Universiy of Edimburgh Business Shool, U.K. Dr. Nemanja Radi London Meropolian Universiy, U.K. Dr. Ornella Rii Universià degli sudi di Roma Tre, Ialy Supervisors Prof. Philip Molyneux Bangor Business Shool, Bangor Universiy, U.K. Prof. Thomas Weyman Jones Loughborough Shool of Eonomis and Business, Loughborough Universiy, U.K. Repor no. 1 /1 4April 1 1

2 FINEST REPORT SERIES The Finanial Inermediaion Nework of European Sudies (FINEST) as as a researh and disussion forum for Banking and Finanial Inermediaion researhers and praiioners hroughou Europe. FINEST operaes as an open researh nework failiaing researh and oher analyial synergies among aademi saff involved in various European Universiies as well as poliymakers and finanial seor praiioners. The FINEST repor series aims o promoe and ensure he rapid diffusion of high qualiy researh of ineres for poliy makers and praiioners in he field of finanial inermediaion. The repor series olles papers by FINEST members ha deal wih advaned opis overing a broad range of finanial inermediaion areas, suh as banking and oher redi inermediaries, insuranes, finanial produs and servies, finanial markes and regulaion. FINEST s repors provide a muli-disiplinary researh approah by inluding heoreial, empirial and qualiaive sudies. The repor paper series provide pariipans wih a forum where hey an share heir researh among key ineresed paries ha have a srong professional and aademi ineres in banking and finanial inermediaion issues. If you would like o learn more abou FINEST or beome a member of our nework, please le us know by visiing: www. fines.uniroma3.i FINEST GOVERNANCE Presiden Frano Fiordelisi, Universiy of Rome III, Ialy Seering Commiee Alessandro Carrea, Universiy of Rome Tor Vergaa, Ialy Philip Molyneux, Bangor Universiy, U.K. Amine Tarazi, Universiy of Limoges, Frane John O.S. Wilson, Universiy of S. Andrew, U.K. Ediorial Board Barbara Casu, Cass Business Shool, Ciy Universiy, U.K. Meryem Duygun Fehi, Universiy of Leieser, U.K. Claudia Girardone, Essex Universiy, U.K. Roman Maousek, London Meropolian Universiy, U.K. Sefano Monferrà, Universiy Parhenope of Naples, Ialy Foios Pasiouras,Tehnial Universiy of Cree, Greee Daniele A. Previai, Universiy of Rome III, Ialy Andrea Sironi, Booni Universiy, Ialy Enrio See, Bana d Ialia, Ialy Thomas Weyman Jones (Chief Edior), Loughborough Universiy, U.K. Advisory Board Viral V. Aharya, New York Universiy, U.S. Allen Berger, The Universiy of Souh Carolina, U.S. David T. Llewellyn, Loughborough Universiy, U.K. Gianni De Niolò, Inernaional Moneary Fund, U.S. Rober DeYoung, Kansas Universiy, U.S. Bill B. Franis, Rensselaer Polyehni Insiue, U.S. Giorgio Gobbi, Bana d Ialia, Ialy Ifhekar Hasan, Fordham Universiy, U.S. Lu Laeven, Inernaional Moneary Fund, U.S. Ike Mahur, Souhern Illinois Universiy a Carbondale, U.S. Lorea J. Meser, Federal Reserve Bank of Philadelphia, U.S. Seven Ongena, Tilburg Universiy, Neherlands George Pennahi, Universiy of Illinois a Urbana- Champaign, U.S. João A. C. Sanos, Federal Reserve Bank of New York, U.S. Anjan Thakor, Washingon Universiy in S. Louis, U.S. Gregory F. Udell, Indiana Universiy, U.S.

3 Index Exeuive summary... p Inroduion... p. 5. The available empirial evidene... p.7 3. Mehodology: inroduion... p Resuls.p Conlusions... p. 18 Mehodologial Appendix... p. 1 3

4 Governmen lae paymen: he effe on he Ialian eonomy Exeuive Summary Wha is he impa on he Ialian eonomy of inreasing paymen delays by he Ialian Governmen? To dae, here are no empirial sudies answering his quesion.i is a omplex esimaion o make as he delay of Governmen paymens have boh a dire impa on redior firms and also soial oss for he whole Ialian eonomy due o wo faors: a)an effe "indued" by lower inome for workers; b) a "dynami" effe due o he defaul of some of he redior firms beause of liquidiy problems generaed by hegovernmen paymen delays. This sudy provides readers wih an overall esimae of he phenomenon a hree levels: dire, indued and dynami effes. Aording o our esimaes, he overall benefi for he Ialian eonomy (i.e. he sum of he dire, indued and dynami effes) in 11 would have been 5.3 billioneuros (i.e..33% of GDP and 3.15% of he volume of he Ialian Governmen ommerial debs) if he Governmen had paid is debs by 3 days, in line wih he EU direive on lae paymen. If we onsider ha GDP (adjused for alendar effes) in 11 has grown by.5%, a shif o a paymen a 3 days (as required by EU direive) would allow he Ialian GDP o grow by.83% (i.e. a 66% inrease in he GDP growh rae aually reorded). Likewise, if he Governmen had been able o pay wihou delay (i.e. a 9 days), he overall ne benefi o he eonomi sysem would have amouned o 3. billioneuros(i.e..% of GDP and 1.89%of he volume of he Ialian ommerial debs): he esimaed hange in he GDP in 11 would herefore be of.7% (i.e. an inrease of 4%of he growh rae of GDP aually reorded). The overall gain for he Ialian eonomy mainly omes from he dire effe (i.e. 58.7% of overall), while he dynami and indued effes aoun for 1.7%and 19.6% respeively. Speifially, he dynami effe(i.e.he lower ompany defauls ha would have ourred in he ase of early Governmen paymens) has been inreasingly emphasized by he media during reen monhs. Aording o our esimaes, in he ase of Governmen paymens a 3 days, he dire and indued effes would also allow he probabiliy of defaul o deline (on average) by.1% in 11 whih, alhough modes,would have allowed an expeed GDP inrease of 1.31 billioneuros. 4

5 Governmen lae paymen: he effe on he Ialian eonomy 1. Inroduion Lae paymens of he Publi Adminisraion (PA) 1 have seadily inreased over he pas years..in deail, he average deferred paymen of he PA has been 9 days in reen years and he average delay in he paymen arrived a 9 days in 11 (86 days in 1, 5 days in 9 and 4 days in 8).The aual paymen of rade loans by he PA has ourred, on average, a abou18 days in 11. The deerioraion of Ialy in he average ime of paymens joins he improvemen reorded in Spain, who wen from 144 days of average delay in 8 o 65 in 1, and a European average delay of jus 7 days. The inreased delay in paymens is assoiaed wih a high volume of rade loans of PA: he volume of rade loans generaed by he PA in he year (urnover) amouned o billion euros 3 (equal o 1.6% of GDP) and oal loans ousanding a he end of 11 (ousanding) is esimaed a billion euros 4. Wha is he os for he Ialian eonomi sysem resuling from he delay in rade loans by he PA? To dae, here are no empirial sudies esimaing his effe. I is a omplex phenomenon o be esimaed sine he delay of paymens of PA has boh a dire os for redior ompanies and (above all) a soial os for he enire Ialian eonomy due o wo faors: 1 Publi Adminisraion inended as enral governmen and various loal eniies. Soure: European Paymen Index 11, InrumJusiia. 3Soure: ISTAT, "Naional Aouns of Publi Adminisraion ".The onsidered enries are inermediae onsumpion", "Soial benefis in kind purhased direly" and "Gross fixed invesmens." 4 The volume of rade loans of he PA an be hardly esimaed, he press (in reporing he esimaes of he indusry s operaors) indiae a range of values beween 7 and 1 billion euros).the value we esimae is obained from a purely orporae view using he following formula o alulae he "day suppliers" of a ompany. day suppliers x 36 Whereas: he "supplier day" of he PA in 11 amouned a 18; he volume of purhases and servies (esimaed by summing he enries "inermediae onsumpion", "Soial benefis in kind purhased direly" and "Gross fixed invesmens", soure, ISTAT, "Naional Aouns of Publi Adminisraion") amouned o billion of euros. I is esimaed ha he volume of loans exising a he end of 11 amouned o 84,11 billion euros. 5

6 a) an "indued" eonomi damage onsising of lower households inome (of firms rediors of PA, bu also of heir supply ompanies) and lower revenue of he same PA (feauring redued ax revenues) b) a "dynami" damage onsising of he failure of businesses redior of PA who, beause of liquidiy problems, are no able o mee heir obligaions. This las faor is he mos diffiul o esimae, bu erainly more imporan as onsanly reminded by Ialian enrepreneurs (as evidened by he news repored in he press). For example, during he hearing a he Senae of he Indusry Commission on April 3, 1, Dr.Sheino (direor of he reasury, finane and welfare of Confindusria) observes " a worrying phenomenon of redi resriion is undergoing boh in erms of quaniy provided and of oss applied... his is made even more serious by he lenghening of paymen erms boh of he publi seor and beween ompanies". In his respe, i is worhwhile noing ha Ialian banks aep o aniipae he laims of he ompanies o he PA wih diffiuly: lae paymens from PA make he adminisraion lose is haraer of "auoliquidabiliy" for suh operaions. This sudy provides an esimae of he phenomenon in is hree levels (dire, indued and dynami) 5. Aording o he esimaes ondued, he overall benefi for he Ialian eonomi sysem (he sum of hree effes: dire, indued and dynami) in 11 would have amouned o 5.3 billion euros (.33% of GDP and 3.15% of he volume of rade loans of PA) if he Governmen had paid is rade loans a 3 days, in ompliane wih he European Union direive on lae paymens. If we onsider ha he GDP (adjused for alendar effes) grew in 11 by.5%, he paymen a 3 days (as required by he EU Direive ha Sae Members will have o implemen in a orre and omplee manner by Marh 13) would have allowed he Ialian eonomi sysem o reord a GDP growh of.83% (i.e.wih a 66% inrease in he growh rae of GDP aually reorded).in he even ha he PA had insead been able o pay wihou delay, and wihin he erms of paymen urrenly in use (ha is, on average, 9 days), he oal ne benefi o he eonomy would have amouned o 3. billion euros (equal o.% of GDP and 1.89% of he volume of rade loans of he PA): he esimaed hange in he GDP in 11 would herefore have beeen of.7% (wih a 4% inrease in he growh rae of GDP aually reorded). The overall ne benefi o he eonomy omes mainly from he dire effe (58.7% of he oal), while he indued and he dynami effe amoun o he 5 The presen sudy is based on he esimaed os of delay in he paymen of rade loans of he PA and, subsequenly, he indued and dynami effes of ha os. We are aware ha he dynami effe may be underesimaed by he simple onsideraion of he finanial effe of he delay, bu he analysis of oher dimensions of lae paymen on he ompany would imply subjeive and arbirary judgmens. As in any eonomi model of esimaion, alhough, no prediion an be onsidered perfely orre, as i relies on assumpions and / or approximaions, he presen work is based on hoies and assumpions, however, plaed in he mos reasonable and realisi way possible. 6

7 1.7% and 19.6% respeively. In pariular, he dynami effe (i.e. minor failures ha would have ourred in he ase of immediae paymen of rade loans of he PA) has been emphasized by he media in reen monhs. Aording o he esimaes ondued, if he PA had been able o guaranee paymens a 3 days, he dire effe on ompanies would have allowed for a reduion (average) of he probabiliy of defaul of.1% in 11 whih, alhough modes, would have allowed an expeed inrease in GDP of 1.31 billion euros.. The available empirial evidene In a sudy published in May 11 ondued by I-Com (Insiue for Compeiiveness), an esimae of he dimension of he problem of lae paymen of he PA is proposed ogeher wih d is effes on he Ialian eonomy. The obje of his sudy is o esimae he dire effes of delays of paymens from he PA (hus ignoring boh he indued and he dynami effe), in erms of oss for businesses and for he enire ommuniy. Regarding businesses, he delay of paymens resuls in a os ha, regardless of he real soluion hosen o address he liquidiy problem, an be well represened by he burden derived fromhe use of bank redi. The auhors of he sudy believe ha, sine he os for he reourse o bank redi by firms supplying PA is undoubedly greaer han he os inurred by he same PA o raise funds on he finanial marke, i deermines a siuaion of alloaive ineffiieny and of damage o he whole ommuniy. By applying he average rae harged by banks for he ransaions in loan advanes o he average deb of PA owards he ompanies a os of 1.9 billion euros for 1 is obained. The os for he soiey is deermined by omparing his value wih he expendiure ha he PA would have o fae o be punual in is paymens, alulaed on he basis of he average rae on quarerly Treasury bills. For 1, he os for he ommuniy amouned o 1.6 billion euros. The sudy repeas his simulaion for differen senarios: if he PA aligned wih he EU average ime delay, he ompanies would save up o 1.3 billion euros and he ommuniy up o 1.18 billion euros. Even in a less opimisi hypohesis of alignmen wih he average delay of he Ialian privae seor, hese savings would be equal, respeively, o 1. and 1. billion euros. The sudy of I-Com (11) shows esimaes based solely on dire and sai effes, wihou onsidering he indire and dynami ones (hardly measurable). 7

8 3. Mehodology: inroduion 6 There are urrenly no sudies on he overall eonomi effe on Ialy deermined by delays in paymens fromhe PA. This sudy aims o esimae he benefi o he eonomy resuling from he promp fulfillmen of he PA in he paymen of is rade loans as fully as possible, by defining a model ha akes ino aoun he main effes (dire, indued and dynami). In he firs phase, he presen sudy esimaes 7 his "overall gross" effe based on a "onenri irles" approah, in order o assess he eonomi impa in eah of he following hree levels: a)dire effe: i is he "gross dire" benefi for businesses redior of PA, in he even ha he PA provides "promply" o he paymen of is rade loans. Similar o he approah of I Com (11), his is esimaed by assuming ha he volume of loans o PA an be fully funded from finanial inermediaries (banks and faoring ompanies) 8. b)indued effe: i is he greaes inome ha would be "indued" (for employees of he ompanies rediors of PA, for employees of he suppliers of he ompanies redior of PA, e.) from he "promp" paymen of laims by he PA in he above defined senarios. These are esimaed hrough a proess of inome muliplier riggered by he "dire" effe. )dynami effe: his is he benefi derived from he avoided failure of hose ompanies rediors of PA ha are no able o mee heir obligaions beause of liquidiy problems. This is esimaed in erms of reduing probabiliy of defaul (PD) of Ialian ompanies due o he dire and indued effe. In he absene of publi daa on he rae of defaul of he ompanies redior of he PA, he esimae of he variaion of PD is based on he model of he Z sore, whih uses he Alman's ehnique of disriminan analysis () 9. 6 For furher informaion, see he mehodologial appendix. 7 As in any eonomi model of esimaion, no prediion an be onsidered perfely orre, as i is based on assumpions and / or approximaions, however, hosen in he mos reasonable and realisi way possible. 8 One more elemen of he dire effe on he eonomy ould be added : he lower ineres raes paid by PA on lae paymens, i.e. (ineress on arrears and penalies for redi reovery (legal fees, e).however, his iem is no aken ino onsideraion for wo reasons: 1) hese addiional harges do no always represen a real os o PA whih avoids hese oss hrough our selemens and in onras wih he above European direive, ) i is no possible o esimae a reasonable perenage os on oal loans in he absene of publi daa and given heir srong subjeiviy. These iems are omied o ensure he reliabiliy of he esimae and in he knowledge ha he overall esimaed effe is prudenial and, herefore, may underesimae he real benefi o he eonomy. 9 Alman E. I. (), Revisiing redi soring models in a Basel environmen, in Ong, M., Credi Raing: Mehodologies, Raionale and Defaul Risk, LondonRisk Books. 8

9 The benefi on he eonomy, due o he lower os for he redior ompanies, is esimaed in he ase where he PA had failed o pay is rade loans a 3 days, onsisen wih he European Union direive on lae paymens (whih inludes paymens wihin 3 days, wih limied exepions up o 6) and ha Member Saes will have o implemen in a orre and omplee manner by Marh 13 in order o avoid infringemen proedures by he Commission. The benefi on he eonomy is also esimaed in he ase of paymen of rade loans by he PA on longer ime horizons suh as: 6 days; 9 days (he urren delay, wihou delay); 1 days; 15 days; 18 days (he siuaion of 11, onsidering he average delay). In he seond sage, we esimae he os for he same PA o raise funds on he finanial marke o mee he promp paymen in he imeframes desribed above. Similarly o wha was done for he alulaion of he onribuion he addiional os for he PA is esimaed using a "onenri irles" approah in order o assess he eonomi impa a eah of he following hree levels: a) dire effe, i is he "dire" os o he PA for he olleion of finanial resoures neessary o ensure promp paymens. Similarly o he raio I- COM, his is esimaed on he basis of he average ineres rae on quarerly Treasury bills; b) indued effe: i onsiss of he lower inome ha would be "indued" (esimaed aording o an enrepreneurial view, i.e., assuming ha he PA has o redue o some exen he os of labor due o he inreased finanial burden inurred o ensure he "promp" paymen of is debs in he various horizons above-defined).these are esimaed hrough a proess of inome muliplier riggered by he "dire" effe, similarly o wha was done for he ase of he redior firms. In he hird sep, we esimae he "oal ne" effe a he hree levels analyzed (dire, indued and dynami), in order o ge an indiaion of real benefi o he Ialian eonomi sysem resuling FROM? a more punual paymen of rade loans by PA. 9

10 4. Resuls In he firs level of analysis, we repor he esimaes of he dire effe for he Ialian eonomy (Table 1). Aording o our esimaes, he businesses rediors of PA aquired in 11 a dire benefi (in erms of lower oss for loan advanes) ha amouned o 4 billion euros (.5% of GDP and.38% of he volume of rade loans of he PA), in he ase of paymen by he PA a 3 days (in line wih he European Union direive on lae paymens whih provides for paymens wihin 3 days).to his purpose, we have assumed ha firms rediors of PA have fully submied o disoun or sold heir laims (amouning o billion euro in 11) a a disoun rae equal o he sum of he average lending rae on self liquidaing and revoaion ransaions 1 (Equal o 5.43% in 11), plus he average managemen fee 11 (equal o.9%) for a number of days orresponding o he differene beween he urren average duraion of redis (18 days) and he esimaed senario (in his ase, 3 days).in he oher senarios onsidered, i is esimaed ha ompanies would have a benefi equal o: 3. billion euros (.% of GDP and 1.91% of he volume of rade loans of he PA), in he ase of paymen in 6 days (limi se by EU Direive for exepions);.4 billion euros (.15% of GDP and 1.43% of he volume of rade loans of he PA), in he ase of paymen in 9 days (i.e. wihou delay) 1.6 billion euros (.1% of GDP and.95% of he volume of rade loans of he PA) in he ase of a paymen wih 3 days delay, so a 1 days; 8 million euros (.5% of GDP and.48% of he volume of rade loans of he PA), in he even of a paymen delay of 6 days, so a 15 days. In order o find he neessary resoures for suh paymens, he Ialian governmen would sill have had o inrease is deb by exraordinary issuing of Treasury Bills (average rae in 11 of 1.57% for quarerly emissions). Esimaes arried ou show ha he finanial burden ha he Ialian Governmen would have inurred ino in order o be able o pay is rade loans a 3 days 1 Soure: Bank of Ialy, Saisial Bullein, "Lending raes on revoaion and self-liquidaing operaions". Alhough "he average rae on self-liquidaing ransaions" appears heoreially more adequae o he analysis arried ou, i is preferable o use he average rae of self-liquidaing and revoable redi lines beause he self-liquidaing ransaions on invoies of PA are ofen denied by he banks and herefore ompanies are fored o finane hemselves hrough revoable ransaions. 11 Soure: Ialian Assoiaion for Faoring (Assifa). 1

11 was 1.1 billion euros in 11 (.7% of GDP). In he oher senarios onsidered, he esimaed os for he PA would have been: 88 million euros, in he ase of paymen in 6 days (limi se by EU Direive for exepions); 66 million euros, in he ase of paymen in 9 days (i.e. wihou delay, and so in he erms of paymen urrenly in use); 44 million euros in he even of a paymen wih 3 days of delay, so a 1 days; million euros, in he even of a paymen delayed of 6 days, so a15 days. Given his os, he Ialian Governmen would sill have benefied from higher ax revenues (he sum of dire axes on higher orporae inomes and indire axes on onsumpion of he employees of redior ompanies) whih? amouned o 689 million euros in he ase of an average duraion of loans of 3 days: he dire ne os for he Ialian Governmen would hen have amoune o 411 million euros.in he oher onsideredsenarios, he higher dire ax revenues of PA would have been: 551 million euros, in he ase of paymen in 6 days (limi se by EU Direive for exepions).in his ase, he dire"ne"os for he Ialian Governmen would have amouned o 39 million euros; 413 million euros, in he ase of paymen in 9 days (i.e. wihou delay, and in he erms of paymen urrenly in use). In his ase, he dire ne os for he Ialian Governmen would have amouned o 47 million euros; 76 million euros in he even of a paymen wih 3 days delay, so a 1 days.in his ase, he dire ne os for he Ialian Governmen would have amouned o 165 million euros; 138 million euros, in he even of a paymendelay of 6 days, so a 15 days. In his ase, he dire ne os for he Ialian Governmen would have amouned o 8 million euros. 11

12 Table 1 The dire effe esimaed for he Ialian eonomy in 11 Panel A: The esimaed effe in millions of Euro Average duraion of Credi * (a) (b) () = (a-b) Dire effe for firms (lower oss) Dire effe for PA (higher finanial harges) Ne dire effe Panel B: The esimaed effe expressed as a perenage of GDP Average duraion of Credi * (a) (b) () = (a-b) Dire effe for firms (lower oss) Dire effe for PA (higher finanial harges) Ne dire effe.3% -.8%.% 3.5% -.7%.18% 6.% -.6%.15% 9.15% -.4%.11% 1.1% -.3%.7% 15.5% -.1%.4% 18.%.%.% Panel C: The esimaed effe in perenage of rade loans of he PA Average duraion of Credi * (a) (b) () = (a-b) Dire effe for firms (lower oss) Dire effe for PA (higher finanial harges) Ne dire effe.86% -.79%.7% 3.38% -.65% 1.73% % -.5% 1.38% % -.39% 1.4% 1.95% -.6%.69% 15.48% -.13%.35% 18.%.%.% Panel D: The esimaed effe in Euro per million euro of radeloans paid Average duraion of Credi * (a) (b) () = (a-b) Dire effe for firms (lower oss) Dire effe for PA (higher finanial harges) Ne dire effe 8, ,85., ,81.5-6, , ,5. - 5, , ,87.5-3,95. 1, ,55. -, , ,76.5-1, , * The "Average duraion of redi" means he sum of he average defermen of paymen and he average delay. 1

13 The ne dire benefi for he Ialian eonomy (benefi for firms, ne of he higher os for he Governmen) would have hus amouned o.91 million euros, in he ase of paymen a 3 days (equivalen o an inrease in GDP of.18%). In oher words, i is esimaed ha for every million euro in rade loans paid by he PA a 3 days, he Ialian GDP would have grown by 17.7 euros. In he oher senarios onsidered, he ne dire benefi o he Ialian eonomi sysem would be equal o:.3 billion euros (.15% of GDP and 1.8% of he volume of rade loans of he PA), in he ase of paymen a 6 days (limi se by EU Direive for exepions); 1.7 billion euros (.11% of GDP and 1.4% of he volume of rade loans of he PA), in he ase of paymen a 9 days (i.e. wihou delay) 1.6 billion euros (.7% of GDP and.69% of he volume of rade loans of he PA) in he ase of a paymen wih 3 days of delay, so a 1 days; 8 million euros (.4% of GDP and.35% of he volume of rade loans of he PA), in he even of a paymen wih a delay of 6 days, so a 15 days. In he seond level of analysis, we repor he esimaes of he indued effe for he Ialian eonomi sysem (Table ). Aording o our esimaes, he new inome generaed as a resul of he benefi for firms rediors of PA (in erms of new inome for employees of firms rediors of PA, employees of he suppliers ompanies of firms rediors of PA and publi employees as a resul of higher ax revenues) would have amouned o 1.4 billion euros (.9% of GDP and.84% of he volume of rade loans of PA) in 11, in he ase of paymen by he PA in 3 days (in line wih he direive of he European Union on lae paymens whih expes paymens wihin 3 days). In he oher senarios onsidered, i is esimaed ha he new indued inome would have amouned o: 1.14 billion euros (.7% of GDP and.67% of he volume of rade loans of he PA), in he ase of paymen in 6 days (limi se by EU Direive for exepions);.4 billion euros (.5% of GDP and.51% of he volume of rade loans of he PA), in he ase of paymen in 9 days (i.e. wihou delay) 13

14 Table The indire effe for he Ialian eonomy in 11 Panel A: The indire effe esimaed in millions of Euro Average duraion of Credi * (d) (e) (f) = (d-e) Indued posiive effe for families inome Negaive impa on households inome Indued ne effe for households inome Panel B: The indire effe esimaed as a perenage of GDP Average duraion of Credi * (d) (e) (f) = (d-e) Indued posiive effe for families inome Negaive impa on households inome Indued ne effe for households inome.11% -.3%.8% 3.9% -.%.7% 6.7% -.%.5% 9.5% -.1%.4% 1.4% -.1%.3% 15.%.%.1% 18.%.%.% Panel C: The indire effe esimaed as a perenage of rade loans of he PA Average duraion of Credi * d) (e) (f) = (d-e) Indued posiive effe for families inome Negaive impa on households inome Indued ne effe for households inome 1.1% -.5%.77% 3.84% -.1%.64% 6.67% -.16%.51% 9.51% -.1%.38% 1.34% -.8%.6% 15.17% -.4%.13% 18.%.%.% Panel D: The indire effe esimaed in Euros for every million euro of rade loans paid Average duraion of Credi * d) (e) (f) = (d-e) Indued posiive effe for families inome Negaive impa on households inome Indued ne effe for households inome 1,1.7 -, , , ,56.5 6, , ,645. 5, ,6.36-1, , , , , , * The "Average duraion of redi" means he sum of he average defermen of paymen and he average delay. 14

15 1.6 billion euros (.4% of GDP and.34% of he volume of rade loans of he PA) in he ase of a paymen wih 3 days of delay, so a 1 days; 8 million euros (.% of GDP and.17% of he volume of rade loans of he PA), in he even of a paymen wih delay of 6 days, so a 15 days. To over he dire os and find? he neessary finanial resoures for he paymens, he Ialian Governmen would have o sop providing inome for heir employees (in an enrepreneurial view). Esimaes arried ou show ha he lower indued inome in 11 would have amouned o 346 million euros in he ase of paymens in 3 days, 77 million euros in he ase of paymens in 6 days, 8 million euros in he ase of paymens in 9 days, 138 million eurosin he ase of paymens in 1 days and 69 million euros in he ase of a paymen in 15 days. The indued ne benefi for he Ialian eonomy (higher inomes for employees indued by he benefi for businesses ne of lower inome indued by finanial burden for he Governmen) would hus have amouned o 1.7 million euros in he ase of paymens in 3 days (equivalen o an inrease in GDP of.7%), o 858 million euros in he ase of paymens in 6 days, o 644 million euros in he ase of paymens in 9 days, o 49 million euros in he ase of paymens in 1 days and 15 million euros in he ase of paymens in 15 days. Given hese higher inomes, he Ialian Governmen would have benefied from a higher "indued" ax revenues (he sum of dire axes on inome and indire axes on onsumpion of employees) equal o 563 million euros in he ase of an average redi duraion of 3 days, 451 million euros in he ase of an average duraion of 6 days, 338 million euros in he ase of an average duraion of 9 days, 6 million euros in he ase of an average duraion of 1 days and 113 million euros in he ase of an average duraion of 15 days. In he hird level of analysis, we repor he esimaes of he dynami effe for he Ialian eonomy (Table 3), whih is he effe ha a faser paymen of rade loans of he PA would generae in erms of fewer failures for Ialian ompanies. Aording o our esimaes, in he ase of paymens in 3 days by he PA in 11, he dire effe on business would generae an (average) reduion of he probabiliy of defaul of he Ialian ompanies of.1% whih would have resuled in an expeed inrease in GDP of 1.31 million euros (equal o.7% of GDP). For he oher senarios, i is esimaed ha he dynami benefi (less failures a a rae of.7%) would have been 1.6 billion euros in he even of paymens in 6 days, 799 million euros in he even of paymens in 9 days, 536 million euros in ase of paymens in 1 days and 7 million euros in he even of paymens in 15 days. 15

16 Table 3 The dynami effe (lower oss for he failures) esimaed for he Ialian eonomy in 11 Average duraion of Credi * In million euro As a perenage of GDP As a perenage of rade loans of he PA in Euro per million euro of rade loanspaid %.93% %.78% %.63% %.47% %.3% %.16% %.%. * The "Average duraion of redi" means he sum of he average defermen of paymen and he average delay. As shown in Table 4, i is esimaed in onlusion ha he oal onribuion o he Ialian eonomy (i.e. he sum of he hree effes: dire, indued and dynami) 1 in 11 would have amouned o 5.3 billion euros (.33% of GDP and 3.15% of he volume of rade loans of he PA). If we onsider ha GDP adjused for alendar effes grew in 11 by.5% 13, i is esimaed (eeris paribus) ha he paymen in 3 days (as required by he EU direive) would have allowed he Ialian eonomi sysem o reord an inrease in GDP of.83% (i.e. so a 66% inrease in he growh rae of GDP aually reorded). I is ineresing o noe ha if he PA had been able o pay wihou delay (i.e. 9 days), he ne effe would have amouned o 3. billion euros (.% of GDP and 1.89% of he volume of rade loans of he PA): he hange in GDP would herefore have been of.7% (i.e. so a 4% inrease in he growh rae of GDP aually reorded). In he absene of available daa abou 1, if a similar expeed benefi ould be assumed (i.e. in he ase of unhanged ondiions), where GDP growh for 1 is esimaed by ISTAT equal o -.5% 14, he expeed hange in he GDP would drop o -.17% for paymen wihin 3 days of rade loans of he PA and -.3% in he absene of delays in paymens of PA (i.e. 9 days). 1 I s imporan o noe ha he sum of he hree omponens is a simple approximaion sine we are dealing wih iems of differen naure: he dire effe expresses he benefi for businesses (lower oss), he dire effe expresses he benefi for employees (higher inomes) and he hird expresses he benefi for businesses (GDP of he non-failed ompanies). 13 Soure: Quarerly Eonomi Aouns, 1/3/1. 14 Soure: Quarerly Eonomi Aouns, 1/3/1. 16

17 Table 4. The overall esimaed effe for he Ialian eonomy in 11 Panel A: The overall effe in million Euro in 11 (h) = (a + d + g) (i) = (b + e) (j) = (h-i) Average duraion of Overall Gross benefi Toal os Toal ne benefi Credi * Panel B: The overall esimaed effe as a perenage of GDP (h) = (a + d + g) (i) = (b + e) (j) = (h-i) Average duraion of Overall Gross benefi Toal os Toal ne benefi Credi *.51% -.11%.4% 3.4% -.9%.33% 6.34% -.7%.7% 9.6% +.5.% 1.17% -.4%.13% 15.9% -.%.7% 18.%.%.% Panel C: The overall esimaed effe as a perenage of redis of he PA in 11 (h) = (a + d + g) (i) = (b + e) (j) = (h-i) Average duraion of Overall Gross benefi Toal os Toal ne benefi Credi * 4.8% -1.3% 3.77% 3 4.1% -.86% 3.15% 6 3.1% -.69%.5% 9.41% -.5% 1.89% % -.34% 1.6% 15.81% -.17%.63% 18.%.%.% Panel D: The dynami effe in Euro per million euro of rade loans paid (h) = (a + d + g) (i) = (b + e) (j) = (h-i) Average duraion of Overall Gross benefi Toal os Toal ne benefi Credi * 48,8.5-1, , ,58.8-8, , , , , , , , , , , ,53.5-1, , * The "Average duraion of redi" means he sum of he average defermen of paymen and he average delay. 17

18 Wih regard o he resul for he PA, i is esimaed ha he oal effe (he sum of he dire os o he finanial burden, he dire benefi due o a higher ax revenues for he higher orporae profis of firms rediors PA and inreased onsumpion of employees, and he ax benefi indued by he inreased ax revenue on families inome) is posiive for all he analyzed senarios wih average duraion: for example, in he ase of paymens in 3 days, he benefi for he Ialian Governmen in 11 would be equal o 15 million euros. In he ase of paymens wihou delay (i.e. 9 days), he benefi in 11 was 91 million euros. Finally, Figure 1 shows he esimaed gross benefi (i.e. wihou onsidering he inreased oss of he Governmen o find he finanial resoures o pay is rade loans) and ne benefi (i.e. onsidering he finanial burden of he Governmen) in relaion o GDP in (dove hiude quesa virgilea)?) he las hree years, onsidering also he hange rae of GDP during he period. As shownin he graph, he oal ne benefi for he Ialian eonomi sysem has inreased over he las four years going from.4% in 8 o.33% in 11, in he ase of paymens a 3 days. 5 Conlusions The average defermen of paymen of he PA has been equal o 9 days in reen years and he average delay in he paymen has reahed 9 days in 11 (86 days in 1, 5 days in 9 and 4 days in 8).The aual paymen of rade loans by he PA has ourred, on average, a 18 days in 11. The inreased delay in paymens is assoiaed wih a high volume of rade loans of he PA: he volume of rade loans generaed by he PA in he year amouned o billion euros (equal o 1.6% of GDP) and he amoun of redis exising a he end of 11 is esimaed a billion euros. Wha is he impa on he Ialian eonomi sysem of he growing delay inrade loans paymen by he Publi Adminisraion (PA)? The presen sudy is he firs o offer a omplee esimae of his effe, aking ino aoun boh he dire effe for ompanies rediors of he PA and (espeially) he soial os for he enire Ialian eonomy deriving from wo faors: a) an "indued" effe onsising of lower inome for families, b) a "dynami" effe ha is he ollapse of some of he firms rediors of PA due o liquidiy problems generaed by paymen delays fromhe PA. Aording o he our esimaes, he overall benefi for he Ialian eonomi sysem (i.e. he sum of he hree effes: dire, indued and dynami) in 11 would have amouned o 5.3 billion euros (.33% of he GDP and 3.15% of he 18

19 volume of rade loans of PA) if he Governmen had paid is rade loans a 3 days, onsisen wih he European Union direive on lae paymens whih Sae Members willhave o implemen by Marh 13. If we onsider ha he GDP (adjused for alendar effes) grew in 11 by.5%, he paymen a 3 days would have allowed he Ialian eonomi sysem o reord a GDP growh of.83% (i.e. an inrease of 66% of he growh rae of GDP aually reorded). In asehe PA had been able o pay wihou delay, in he urren paymen erms in use (i.e. 9 days), he oal ne benefi o he eonomy would have amouned o 3. billion euros(.% of he GDP and 1.89% of he volume of rade loans of he PA). The overall ne benefi o he eonomy omes mainly from he dire effe (58.7% of he oal), whereas he dire and indued effes amoun o 1.7% and 19.6% respeively. 19

20 Figure 1 The oal esimaed effe on he Ialian eonomi sysem resuling from a reduion of rade loans erms of paymen by he Publi Adminisraion in he period 8-11 Panel A: Overall effe gross of finanial expenses for he Governmen,6%,5% Change of GDP,4%,3%,%,1%,% ,47%,37%,7%,17%,6% 9,44%,35%,6%,18%,9% 1,46%,38%,3%,%,15% 11,51%,4%,34%,6%,17% Panel B: Overall effe ne of finanial expenses for he Governmen,5%,4% Change of GDP,3%,%,1%,% ,31%,4%,18%,11%,4% 9,37%,3%,%,15%,7% 1,35%,9%,3%,17%,11% 11,4%,33%,7%,%,13%