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Sub-national deficits in European countries: The impact of fiscal rules and tax autonomy

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This paper empirically examines how fiscal rules and tax autonomy influence deficits of sub-national sectors across European countries. I use a new panel-data set to measure tax autonomy and the stringency of fiscal rules for EU15 regional and local government sectors over the period 1995 to 2008. I apply an instrumental variables approach to obtain an unbiased estimate of the impact of fiscal rules on deficits. I use political variables describing the central governments characteristics as instruments for fiscal rules at the sub-national level. The results show that the effectiveness of fiscal rules and tax autonomy depends on the constitutional structure. Fiscal rules decrease deficits only in unitary countries. Deficits of sub-national sectors in federations can be avoided through tax autonomy.

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FOREMNY, Dirk. Sub-national deficits in European countries: The impact of fiscal rules and tax autonomy. _European Journal of Political Economy_. 2014. Vol. 34, núm. June, pàgs. 86-110. [consulta: 28 de gener de 2026]. ISSN: 0176-2680. [Disponible a: https://hdl.handle.net/2445/119349]

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