Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/219123 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8305
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
fiscal rules
economic growth
constitutions
historical public finance
JEL: 
O11
O12
D74
Document Type: 
Working Paper
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