Fiscal Rules: Historical, Modern, and Sub-National Growth Effects

Arbeitspapier

We examine how fiscal rules influence economic growth. The results show that constitutional fiscal rules promoted growth from the Industrial Revolution until World War II (1789-1950) and also increased modern economic growth (1985-2015). To address selection on unobservables, we conduct a large-scale international survey among 1,224 economic experts in 109 countries. We exploit cross-country differences in expert preferences as an instrumental variable for the adoption of constitutional fiscal rules. The results show that the cumulative long-run effect of permanently adopting constitutional fiscal rules on real per capita GDP is 18%. As a complementary strategy to tackle unobservables, we examine sub-national fiscal rules, employing a newly collected dataset of 206 regional governments from 10 federal states (1992-2012). The results show that fiscal rules also increased economic growth at the sub-national level.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8305

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Analyses of Economic Development ; Microeconomic Analyses of Economic Development ; Conflict; Conflict Resolution; Alliances; Revolutions
• Subject: fiscal rules ; economic growth ; constitutions ; historical public finance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gründler, Klaus ; Potrafke, Niklas
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/219123