Fiscal rules are laws aimed at reducing the incentive to accumulate debt, and many countries adopt them to discipline local governments. Yet, their effectiveness is disputed because of commitment and enforcement problems. We study their impact applying a quasi-experimental design in Italy. In 1999, the central government imposed fiscal rules on municipal governments, and in 2001 relaxed them below 5,000 inhabitants. We exploit the before/after and discontinuous policy variation, and show that relaxing fiscal rules increases deficits and lowers taxes. The effect is larger if the mayor can be reelected, the number of parties is higher, and voters are older.

Do fiscal rules matter? / V. Grembi, T. Nannicini, U. Troiano. - In: AMERICAN ECONOMIC JOURNAL. APPLIED ECONOMICS. - ISSN 1945-7782. - 8:3(2016 Jul), pp. 1-30. [10.1257/app.20150076]

Do fiscal rules matter?

V. Grembi
Primo
;
2016

Abstract

Fiscal rules are laws aimed at reducing the incentive to accumulate debt, and many countries adopt them to discipline local governments. Yet, their effectiveness is disputed because of commitment and enforcement problems. We study their impact applying a quasi-experimental design in Italy. In 1999, the central government imposed fiscal rules on municipal governments, and in 2001 relaxed them below 5,000 inhabitants. We exploit the before/after and discontinuous policy variation, and show that relaxing fiscal rules increases deficits and lowers taxes. The effect is larger if the mayor can be reelected, the number of parties is higher, and voters are older.
economics; econometrics and finance (all); 2001 economics, econometrics and finance (miscellaneous)
Settore SECS-P/01 - Economia Politica
Settore SECS-P/02 - Politica Economica
Settore SECS-P/03 - Scienza delle Finanze
lug-2016
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/545334
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