Efficiency at a Cost: How a Fiscal Rule on Disbursement Timelines Shifted Public Investment Toward Repairs

This paper examines how an efficiency-oriented fiscal rule influences the composition of public investment. We study Thailand’s 2021 fiscal rule reform limiting the disbursement period for investment budgets to one year after initial approval, replacing a previously unrestricted timeline. We apply seeded LDA model to classify over 360,000 Thailanguage government projects and to estimate the probability that each project reflects repair activity. We then implement a difference-in-differences framework. Our identification exploits variation in departments’ pre-policy reliance on construction projects, which proxy exposure to tighter disbursement constraints. We find that departments more exposed to the reform significantly increased their reliance on repairoriented projects, which are typically simpler and faster to execute. This adjustment emerges gradually, is more pronounced among larger departments, and coincides with higher post-reform disbursement rates, indicating that the policy achieved its primary objective of accelerating budget execution. At the same time, the results suggest a tradeoff: efficiency-oriented fiscal rules can alter agencies’ incentives in ways that shift investment portfolios toward projects that are easier to implement under tighter timelines. Overall, the study highlights how fiscal rule design can shape not only the pace but also the composition of public investment.