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

Antonio Acconcia, Giancarlo Corsetti and Saverio Simonelli

American Economic Review, 2014, vol. 104, issue 7, 2185-2209

Abstract: A law issued to combat political corruption and Mafia infiltration 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 fiscal policy, and holding the tax burden of local residents constant—to be 1.5. Assuming that lagged spending is exogenous to current output brings the estimate of the overall multiplier up to 1.9. These results suggest that local spending adjustment may be quite consequential for local activity.

JEL-codes: D72 E62 H71 K42 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.7.2185
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Citations: View citations in EconPapers (162)

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