Fiscal Rules and the selection of politicians: theory and evidence from Italy
69 Pages Posted: 14 Sep 2017 Last revised: 19 May 2022
Date Written: May 19, 2022
Fiscal rules, or constraints on the policymaking discretion of elected officials, are widely used to regulate fiscal policies. Using data on Italian municipalities, we employ a difference-in-discontinuity design to show a negative effect of fiscal rules on mayoral candidates’ education. The effect is driven by municipalities where fiscal rules meaningfully restrict the action space of politicians. These results are consistent with a formal model of fiscal rules and political selection and highlight a new "general equilibrium" effect of the former. Namely, reducing discretion may alleviate pork-barrel spending, but may also lower the quality of politicians.
Keywords: fiscal rules, selection of politicians, deficit, difference-in-discontinuity
JEL Classification: D72, H62, H70, H72
Suggested Citation: Suggested Citation