Assessing Types of Fiscal Rules

We evaluate the impact of dierent sub-national scal rules on budget outcomes in a quasi-experimental setup. In 1999 the Italian central government introduced sub- national scal rules aimed at imposing a scal discipline on the municipalities and facilitate the coordination of the local public nance with the national one. Since then every year the national government sets both requirements and targets of the rules, alternatively, expenditures' caps and budget balance rules. Using data at the municipal level, we test the impact of shifting from one rule to the other, given that the shift did not take place for all municipalities in our sample at the same time. Our results show that a shift to the expenditures' cap rule produce a decrease in current expenditures, with no consequences on other budget outcome variables.