Reconstruction Multipliers

Francesco Porcelli and Riccardo Trezzi

No 2014-79, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Following the 2009 L'Aquila earthquake, financing of reconstruction by the Italian central government resulted in a sharp and unanticipated discontinuity in grants across municipalities that were ex-ante very similar. Using the emergency financing law as an instrument, we identify the causal effect of municipal government spending on local activity, controlling for the negative supply shock from the earthquake. In our estimates, this \"reconstruction multiplier\" is around unity, and we show that the grants provided public insurance. Economic activity contracted in municipalities that did not receive the grants, while it expanded--or at least did not contract--in municipalities that did receive them. Our results suggest several policy implications with respect to the allocation mechanism of such grants.

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: 56 pages
Date: 2014-10-01
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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https://www.federalreserve.gov/econresdata/feds/2014/files/201479pap.pdf (Original) (application/pdf)

Related works:
Working Paper: Reconstruction multipliers (2016)
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