Shake me the money!

Francesco Porcelli and Riccardo Trezzi

No 1418, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: During a natural disaster, the negative supply shock due to the destruction of productive capacity is counteracted by a positive demand shock due to public grants for assistance and reconstruction, positing an identification issue in empirical work. Focusing on the 2009 ’Aquilano’ earthquake in Italy as a case study, we take advantage of quantified measure of damages for 75,424 buildings to estimate the negative supply shock and of a law issued to allocate reconstruction grants, which resulted in a sharp, exogenous discontinuity in transfers and output behavior across neighboring municipalities to estimate the positive demand shock. Diff-in-diff analysis suggests that local output multipliers of reconstruction grants (net of marginal tax rebates) are below unity. Yet the size of the grants act as a public insurance scheme, preventing a fall in output.

Keywords: Natural Disasters; Fiscal Multipliers; Mercalli Scale (search for similar items in EconPapers)
JEL-codes: C36 E62 H70 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-07
New Economics Papers: this item is included in nep-eur, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Shake me the money! (2014)
Working Paper: Shake me the money! (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:1418

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