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

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

No 8305, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We estimate the multiplier 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 Law mandating the interruption of public work on evidence of mafia infiltration 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 effects of fiscal and monetary measures. Accounting for contemporaneous and lagged effects, and controlling for the direct impact of anti-mafia measures on output, our results suggest a multiplier as high as 1.4 on impact, and 2 including dynamic effects.

Keywords: government spending; instrumental variables; multiplier (search for similar items in EconPapers)
JEL-codes: C26 E62 H54 (search for similar items in EconPapers)
Date: 2011-04
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Related works:
Journal Article: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2014) Downloads
Working Paper: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2013) Downloads
Working Paper: Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2011) Downloads
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