Fiscal Rules and Composition Bias in OECD Countries

Momi Dahan and Michel Strawczynski

No 3088, CESifo Working Paper Series from CESifo

Abstract: Using a sample of OECD countries, this paper finds that while fiscal rules succeeded in reducing total government expenditures and budget deficits in the medium term, they significantly affected the composition of government expenditure: the ratio of social transfers to government consumption declined. In contrast, we do not find a stable effect of fiscal rules on public investment. It is shown that the compositional shift against social transfers is beyond “from welfare to work” policies, which have been adopted by many OECD countries during the nineties. Our empirical examination reveals that the reduction of social transfers relative to government consumption did not occur in countries with strong legal protection to social rights.

Keywords: fiscal rules; government deficit; government expenditure; expenditures composition (search for similar items in EconPapers)
JEL-codes: E62 H00 H30 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3088

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