Local Government Resilience: How to Effectively Respond to External Shocks?

The recent economic and fiscal crises have increasingly emphasized the importance of individual, organizational and economic systems’ resilience both in the private and the public sector. The literature on resilience spans from ecology, to physics, to economics and management. In our paper, we focus on the financial resilience of government entities, trying to identify the main shocks and patterns of financial resilience in Italian municipalities at a juncture where economic downturn, fiscal crises and austerity are posing unprecedented challenges to their financial management. We find that there is not one single recipe for effectively responding to external shocks, and, even in a highly institutionalized context as the governmental one, the specific response of municipalities to shock depends on their 'DNA', in terms of internal, path dependent features and filtering of external pressures. We thus propose four main municipal approaches to financial resilience.