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

Antonio Acconcia (), Giancarlo Corsetti () and Saverio Simonelli

No ECO2011/12, Economics Working Papers from European University Institute

Abstract: We estimate the multiplier by relying on differences in spending in infrastructure across Italian provinces and an instrument identifying investment changes that are large and exogenous to local cyclical conditions. We derive our instrument from the an Italia law mandating the interruption of public work on evidence of ma.a in.ltration of city councils. Our IV estimates on cross sectional data allow us to address common problems in time series analysis, such as the risk of estimating spuriously high multipliers because of endogeneity and reverse causation, or the risk of confounding the e¤ects of .scal and monetary measures. While accounting for contemporaneous and lagged effects, and controlling for the direct impact of anti-ma.a measures on output, our results suggest a multiplier as high as 1.4 on impact, and 2 including dynamic effects.

Keywords: Government Spending; Multiplier; Instrumental Variables. (search for similar items in EconPapers)
JEL-codes: E62 H54 C26 (search for similar items in EconPapers)
Date: 2011
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Related works:
Working Paper: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2013)
Working Paper: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2011)
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