Fiscal Rules and Composition Bias in OECD Countries
AbstractUsing 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.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3088.
Date of creation: 2010
Date of revision:
fiscal rules; government deficit; government expenditure; expenditures composition;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H00 - Public Economics - - General - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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