Does accrual accounting make municipalities spend less?

Abstract Accrual accounting in the public sector aims to enhance fiscal transparency, decision-making, comparability, and cost-effectiveness. The Italian reform of public sector accounting in 2011 provides an excellent quasi-natural experiment for studying the effect of accrual accounting on public financial management. Our results indicate that accrual accounting has a disciplining effect on local public spending, strengthening fiscal positions. Importantly, we demonstrate that the effect varies across municipalities: It is stronger during non-electoral periods and for high-quality institutions.