Are fiscal rules context specific?

In their article, Israel García and Bernd Hayo examine the interaction between fiscal rules and gender-specific voting rules using the example of municipalities in the Spanish region of Madrid. They focus on two types of fiscal rules: rules for the federal allocation of responsibilities and rules promoting budget transparency.

With regard to rules for the federal allocation of powers, their analysis shows that a legally mandated shift of social spending from the municipal to the regional level leads to a reduction in municipal expenditures, as desired. However, this effect is only half as strong when gender quotas are applied in municipal elections, which is associated with a larger proportion of female council members.

With regard to rules promoting budget transparency, the findings suggest that in municipalities with gender quotas (for municipal elections), budget plans are unbiased indicators of the realized final budgets. Also, the volatility of errors in budget forecasts is lower in these municipalities. This can be interpreted as an indication that a larger proportion of women in municipal councils leads to greater budget transparency.

Overall, the analysis suggests that the effect of fiscal rules can be context-specific. The analysis also shows that stronger political representation of women in local councils can lead to different fiscal policies, at least when there is sufficient budgetary leeway.

The corresponding article has been published as: García, I., and Hayo, B. (2025). Wirken Fiskalregeln kontextspezifisch? Evidenz für Gemeinden in Spanien. Perspektiven der Wirtschaftspolitik, 2025.

Link to the article: https://doi.org/10.1515/pwp-2025-0009

Contact: Dr. Israel García Dominguez