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On the Determinants of Fiscal Non-Compliance: An Empirical Analysis of Spain’s Regions

Author

Listed:
  • Mar Delgado-Téllez
  • Victor Duarte Lledo
  • Javier J. Pérez

Abstract

This paper proposes an empirical framework that distinguishes voluntary from involuntary compliance with fiscal deficit targets on the basis of economic, institutional, and political factors. The framework is applied to Spain’s Autonomous Communities (regions) over the period 2002-2015. Fiscal noncompliance among Spain’s regions has shown to be persistent. It increases with the size of growth forecast errors and the extent to which fiscal targets are tightened, factors not fully under the control of regional governments. Non-compliance also tends to increase during election years, when vertical fiscal imbalances accentuate, and market financing costs subside. Strong fiscal rules have not shown any significant impact in containing fiscal non-compliance. Reducing fiscal non-compliance in multilevel governance systems such as the one in Spain requires a comprehensive assessment of intergovernmental fiscal arrangements that looks beyond rules-based frameworks by ensuring enforcement procedures are politically credible.

Suggested Citation

  • Mar Delgado-Téllez & Victor Duarte Lledo & Javier J. Pérez, 2017. "On the Determinants of Fiscal Non-Compliance: An Empirical Analysis of Spain’s Regions," IMF Working Papers 2017/005, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/005
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    Cited by:

    1. Mar Delgado-Téllez & José Federico Geli & Enrique Moral-Benito & Javier J. Pérez, 2022. "Outsourcing and public expenditure: an aggregate perspective with regional data," Regional Studies, Taylor & Francis Journals, vol. 56(8), pages 1347-1358, August.
    2. Kea BARET, 2021. "Fiscal rules’ compliance and Social Welfare," Working Papers of BETA 2021-38, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Carolina Ulloa-Suárez & Oscar M. Valencia & Jorge Guerra & Gustavo Sánchez, 2025. "Rules Met, Goals Missed: The Compliance–Sustainability Gap," Working Papers of BETA 2025-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. European Fiscal Board (EFB), 2019. "Assessment of EU fiscal rules with a focus on the six and two-pack legislation," Reports 2019, European Fiscal Board.
    5. Ardanaz, Martín & Ulloa-Suárez, Carolina & Valencia, Oscar, 2024. "Why don't we follow the rules? Drivers of compliance with fiscal policy rules in emerging markets," Journal of International Money and Finance, Elsevier, vol. 142(C).
    6. Xisco Oliver Rullán & Joan Rosselló Villalonga, 2018. "The Determinants of Regional Budget Forecast Errors in Federal Economies: Spain 1995-2013," Hacienda Pública Española / Review of Public Economics, IEF, vol. 226(3), pages 85-121, September.
    7. Fernando González & Diego Martínez-López, 2021. "El diseño de reglas fiscales en gobiernos subcentrales. El caso de España," Policy Papers 2021-01, FEDEA.
    8. Reuter, Wolf Heinrich, 2019. "When and why do countries break their national fiscal rules?," European Journal of Political Economy, Elsevier, vol. 57(C), pages 125-141.
    9. Picchio, Matteo & Santolini, Raffaella, 2020. "Fiscal rules and budget forecast errors of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 64(C).
    10. Wolf Heinrich Reuter & Oļegs Tkačevs & Kārlis Vilerts, 2022. "Fiscal rules and volatility: the role of stabilising properties and compliance," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(1), pages 21-52, February.
    11. Reuter, Wolf Heinrich & Tkačevs, Oļegs & Vilerts, Kārlis, 2018. "On the design of stabilising fiscal rules," Working Papers 11/2018, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    12. Martin Wafula Nandelenga & Mark J Ellyne, 2020. "Fiscal Rules and the Compliance debate: Why do Countries adopt Rules and fail to comply?," ERSA Working Paper Series, Economic Research Southern Africa, vol. 0.
    13. Andrián, Leandro & Hirs-Garzon, Jorge & Urrea, Ivan Leonardo & Valencia, Oscar, 2024. "Fiscal rules and economic cycles: Quality (always) Matters," European Journal of Political Economy, Elsevier, vol. 85(C).
    14. Alberto Vaquero-García & María Cadaval-Sampedro & Santiago Lago-Peñas, 2022. "Do Political Factors Affect Fiscal Consolidation? Evidence From Spanish Regional Governments," SAGE Open, , vol. 12(1), pages 21582440221, March.

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    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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