The Unmeasured Cost of Fiscal Execution: Payment Timing and Public Service Delivery

When governments face fiscal stress, they frequently manage consolidation by delaying cash payments on legally incurred obligations rather than cutting explicit appropriations. This "execution wedge" reduces the real resources available for public production while leaving formal appropriations unchanged. We identify the causal effect of this adjustment margin using monthly administrative data from Ecuadors public health system, exploiting institutional features that make the cash execution pipeline observable and its frictions plausibly exogenous. A one-standard-deviation increase in the execution wedge reduces hospital discharges by 19.9 percent and increases the conditional inpatient mortality rate after 48 hours by 59 percent. Conversely, mortality within 48 hours an indicator of patient severity at arrival, is unaffected. These findings demonstrate that payment timing operates as an active fiscal policy variable with first-order welfare costs that are unmeasured in standard fiscal policy analysis.