Fiscal Rules and Public Spending: Evidence from Italian Municipalities

W. D. Gregori

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: The aim of this paper is to investigate the extent to which local budget spending composition reacts to fiscal rules variations. I consider the budget of Italian municipalities and exploit specific changes in the Domestic Stability Pact s rules, to perform a difference-in-discontinuities analysis. The results show that not all rules are equally effective: imposing a cap on the total amount of consumption and investment is not as binding as two caps, one specific for consumption and a different one for investment spending. More specifically, the consumption variation is triggered by changes in the level of wages and services spending, while investment relies on infrastructure movements. In addition, there is evidence that when an increase in investment is achieved, there is also a higher budget deficit level.

JEL-codes: C21 C23 H72 H74 H77 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-pbe and nep-sog
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp923

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