Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment

Antonio Acconcia, Giancarlo Corsetti and Saverio Simonelli

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: A law issued to combat political corruption and ma.a in.ltration of city councils in Italy has resulted in episodes of large, unanticipated, temporary contractions in local public spending. Using these episodes as instruments, we estimate the output multiplier of spending cuts at provincial level – controlling for national monetary and .scal policy, and holding the tax burden of local res- idents constant – to be 1.2. The effects of lagged spending, assumed exogenous to current output, bring this estimate up to 1.8. These results suggest that local spending adjustment may be quite consequential for local activity.

Keywords: Government Spending; Multiplier; Instrumental Variables; Quasi-experiment (search for similar items in EconPapers)
JEL-codes: C26 E62 H54 (search for similar items in EconPapers)
Date: 2011-04-05, Revised 2013-02-04
New Economics Papers: this item is included in nep-geo and nep-pbe
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Citations: View citations in EconPapers (6)

Published in American Economic Review, 2014, vol. 104(7), pp. 1–26

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Related works:
Journal Article: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2014)
Working Paper: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2011)
Working Paper: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2011)
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