Fiscal Rules and the Selection of Politicians: Theory and Evidence from Italy

Abstract

Fiscal rules, or constraints on the policymaking discretion of elected o cials, are widely used to regulate scal policies. Using data on Italian municipalities, we employ a di erence-in-discontinuity design to provide evidence of the negative e ect of scal rules on mayoral candidates education. Municipalities in which scal rules meaningfully restrict the action space of politicians drive the e ect. These results are consistent with a formal model of scal rules and political selection. We highlight that reducing discretion may a ect the composition of the pool of players: it may alleviate pork-barrel spending but also negatively a ect the education of politicians.