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Fiscal rules and their influence on public sector efficiency

López-Herrera, Carmen and Cordero, José M. and Pedraja-Chaparro, Francisco and Polo, Cristina (2023): Fiscal rules and their influence on public sector efficiency.

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This paper explores the possible link between the presence and stringency of fiscal rules and the overall efficiency levels of the public sector for a sample of 50 economies from different geographical regions around the world. In particular, we are interested in analyzing this possible relationship in the years following the period of fiscal consolidation that most countries experienced after the 2008 financial crisis. To do this, we rely on a nonparametric conditional approach that allows the consideration of two alternative composite indicators representing fiscal rule strength level as a potential conditional factor that might affect the estimation of efficiency scores reflecting public sector performance. Our results suggest that the influence of fiscal rules on public sector efficiency scores is significant and negative, especially when the system of fiscal rules has not reached an advanced stage of development.

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