Stability through constraints: the impact of fiscal rules on autocratic survival

A growing literature has investigated the role that formal and informal economic institutions play for autocratic survival. However, this literature has, so far, ignored a type of formal economic institution that has grown in importance among both democracies and non-democracies in recent decades, namely, national fiscal rules. In this article, we argue that fiscal rules can affect autocratic survival but that the effect is time-dependent. The introduction of a stricter fiscal rules framework causes short-term fiscal retrenchment and might increase the uncertainty among regime supporters about the provision of future patronage and spoils. However, stricter fiscal rules also improve long-term fiscal management and, thus, increase investor confidence and economic performance in the long run. Consequently, fiscal rules stabilize autocratic regimes in the long run but not in the short run. Fixed-effect estimations on a panel of autocracies from 1987 to 2016 provide substantial evidence in favour of this argument.