Balanced budget rules and fiscal outcomes: Evidence from historical constitutions

Arbeitspapier

This paper studies the long-run fiscal consequences of balanced budget rules (BBR) that are enshrined in a country's constitution. Using historical data dating back to the 19th century and applying a difference-in-difference approach we find that the introduction of a constitutional-BBR reduces government debt-to-GDP and expenditure-to-GDP ratios, on average, by around 11 and 3 percentage points, respectively. We do not find evidence that BBRs affect tax revenues. Our analysis indicates that such rules reduce the probability of experiencing a debt crisis and that the effective enforcement of BBRs can be conditional on the quality of democratic institutions. In addition, we implement an instrumental variable approach by instrumenting the probability of having budget rules on de jure constraints on changing the constitution. This and other tests suggest that the relations we find are largely causal going from BBRs to fiscal outcomes.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ZEW Discussion Papers ; No. 16-034

Klassifikation und Themen

• Klassifikation: Wirtschaft ; National Budget, Deficit, and Debt: General ; Basic Areas of Law: General (Constitutional Law) ; Economic History: Government, War, Law, International Relations, and Regulation: General, International, or Comparative
• Thema: economic effects of constitutions ; fiscal rules ; historical public finances ; sovereign debt crises

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Asatryan, Zareh ; Castellón, Cesar ; Stratmann, Thomas
• Ereignis: Veröffentlichung
• (wer): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (wo): Mannheim
• (wann): 2017

Weitere Informationen

• Handle: http://hdl.handle.net/10419/173093
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ