Abstract
This paper focuses on the observed empirical relationship between fiscal rules and budget deficits, and examines whether this correlation is driven by an omitted variable, namely voter preferences. We make use of two different estimation methods to capture voter preferences in a panel of Swiss sub-federal jurisdictions. First, we include a recently constructed measure of fiscal preferences. Second, we capture preferences through fixed effects with a structural break as women are enfranchised. We find that fiscal rules continue to have a significant impact on real budget balances.
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Most of the work on this paper was carried out while Krogstrup was at The Graduate Institute of International Studies, Geneva, Switzerland, and while Wälti was at the Department of Economics, Trinity College Dublin, Ireland. We are grateful to two anonymous referees and the Editor for insightful comments and suggestions. Our thanks also extend to Patricia Funk, Alois Stutzer, Lukas Kienast, Eva May, Christophe Matthey, Madeleine Schneider, and Elisabeth Aebischer for providing data. The views expressed in this paper are those of the authors and do not necessarily represent those of the Swiss National Bank.
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Krogstrup, S., Wälti, S. Do fiscal rules cause budgetary outcomes?. Public Choice 136, 123–138 (2008). https://doi.org/10.1007/s11127-008-9285-y
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DOI: https://doi.org/10.1007/s11127-008-9285-y