Fiscal Rules and Composition Bias in OECD Countries

CESifo Working Paper Series No. 3088

Journal of Policy Analysis and Management, Vol. 32(3), pp. 484-504

43 Pages Posted: 18 Jun 2010

See all articles by Momi Dahan

Momi Dahan

Hebrew University of Jerusalem - School of Public Policy; CESifo (Center for Economic Studies and Ifo Institute)

Michel Strawczynski

Hebrew University of Jerusalem - Eliezer Kaplan School of Economics and Social Sciences; Hebrew University of Jerusalem _ Public Policy

Date Written: June 17, 2010

Abstract

Using a sample of OECD countries, this paper finds that while fiscal rules succeeded in reducing total government expenditures and budget deficits in the medium term, they significantly affected the composition of government expenditure: the ratio of social transfers to government consumption declined. In contrast, we do not find a stable effect of fiscal rules on public investment. It is shown that the compositional shift against social transfers is beyond “from welfare to work” policies, which have been adopted by many OECD countries during the nineties. Our empirical examination reveals that the reduction of social transfers relative to government consumption did not occur in countries with strong legal protection to social rights.

Keywords: fiscal rules, government deficit, government expenditure, expenditures composition

JEL Classification: H00, H30, E62

Suggested Citation

Dahan, Momi and Strawczynski, Michel, Fiscal Rules and Composition Bias in OECD Countries (June 17, 2010). CESifo Working Paper Series No. 3088, Journal of Policy Analysis and Management, Vol. 32(3), pp. 484-504, Available at SSRN: https://ssrn.com/abstract=1626125

Momi Dahan (Contact Author)

Hebrew University of Jerusalem - School of Public Policy ( email )

Mount Scopus
Jerusalem 91905
Israel
972-2-5883709 (Phone)
972-2-5880047 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Michel Strawczynski

Hebrew University of Jerusalem - Eliezer Kaplan School of Economics and Social Sciences ( email )

Mount Scopus
Jerusalem, 9190501
Israel

HOME PAGE: http://michelstrawczynski.huji.ac.il/

Hebrew University of Jerusalem _ Public Policy ( email )

School of Public Policy
Jerusalem
Israel
972-2-5881531 (Phone)

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