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Fiscal Rules and the Selection of Politicians: Theory and Evidence from Italy

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  • Matteo Gamalerio
  • Federico Trombetta

Abstract

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 provide evidence of the negative effect of fiscal rules on mayoral candidates' education. Municipalities in which fiscal rules meaningfully restrict the action space of politicians drive the effect. These results are consistent with a formal model of fiscal rules and political selection. We highlight that reducing discretion may affect the composition of the pool of players: It may alleviate pork barrel spending but also negatively affect the education of politicians.

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  • Matteo Gamalerio & Federico Trombetta, 2025. "Fiscal Rules and the Selection of Politicians: Theory and Evidence from Italy," American Economic Journal: Economic Policy, American Economic Association, vol. 17(3), pages 131-164, August.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:3:p:131-64
    DOI: 10.1257/pol.20220325
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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