Fiscal rules and composition bias in OECD countries

Research output: Working paper/preprintWorking paper


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.
Original languageEnglish
PublisherCESifo Group
Number of pages21
StatePublished - 2010

Publication series

NameCESifo Working Papers

Bibliographical note

CESifo Working Paper Series No. 3088


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