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

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Author Info

  • Antonio Acconcia
  • Giancarlo Corsetti
  • Saverio Simonelli

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.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2011/12.

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Date of creation: 2011
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Handle: RePEc:eui:euiwps:eco2011/12

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Keywords: Government Spending; Multiplier; Instrumental Variables.;

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References

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  1. Jonas D. M. Fisher & Ryan Peters, 2009. "Using stock returns to identify government spending shocks," Working Paper Series WP-09-03, Federal Reserve Bank of Chicago.
  2. Acconcia, Antonio & Immordino, Giovanni & Piccolo, Salvatore & Rey, Patrick, 2013. "Accomplice-Witness and Organized Crime: Theory and Evidence from Italy," CEPR Discussion Papers 9543, C.E.P.R. Discussion Papers.
  3. Emi Nakamura & Jón Steinsson, 2011. "Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions," NBER Working Papers 17391, National Bureau of Economic Research, Inc.
  4. Clemens, Jeffrey & Miran, Stephen, 2010. "The effects of state budget cuts on employment and income," MPRA Paper 38715, University Library of Munich, Germany.
  5. Karel Mertens & Morten O. Ravn, 2009. "Empirical evidence on the aggregate effects of anticipated and unanticipated US tax policy shocks," Working Paper Research 181, National Bank of Belgium.
  6. Ilzetzki, Ethan & Mendoza, Enrique G. & Végh, Carlos A., 2013. "How big (small?) are fiscal multipliers?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 239-254.
  7. Eric M. Leeper & Todd B. Walker & Shu-Chun Susan Yang, 2011. "Foresight and Information Flows," NBER Working Papers 16951, National Bureau of Economic Research, Inc.
  8. Giordano, Raffaela & Momigliano, Sandro & Neri, Stefano & Perotti, Roberto, 2007. "The effects of fiscal policy in Italy: Evidence from a VAR model," European Journal of Political Economy, Elsevier, vol. 23(3), pages 707-733, September.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Fiscal Stimulus Works
    by Mark Thoma in Economist's View on 2011-10-02 16:45:00
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Cited by:
  1. Tommaso Ferraresi & Andrea Roventini & Giorgio Fagiolo, 2013. "Fiscal Policies and Credit Regimes: A TVAR Approach," Working Papers 03/2013, University of Verona, Department of Economics.
  2. Cristiano Cantore & Paul Levine & Giovanni Melina, 2013. "A Fiscal Stimulus and Jobless Recovery," IMF Working Papers 13/17, International Monetary Fund.
  3. Gernot Müller & André Meier & Giancarlo Corsetti, 2012. "What Determines Government Spending Multipliers?," IMF Working Papers 12/150, International Monetary Fund.
  4. Virkola, Tuomo, 2014. "Exchange Rate Regime, Fiscal Foresight and the Effectiveness of Fiscal Policy in a Small Open Economy," ETLA Reports 20, The Research Institute of the Finnish Economy.
  5. W. D. Gregori, 2014. "Fiscal Rules and Public Spending: Evidence from Italian Municipalities," Working Papers wp923, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Sylvain Leduc & Daniel Wilson, 2012. "Roads to prosperity or bridges to nowhere? theory and evidence on the impact of public infrastructure investment," Working Paper Series 2012-04, Federal Reserve Bank of San Francisco.
  7. Guglielmo Barone & Sauro Mocetti, 2014. "Natural disasters, growth and institutions: a tale of two earthquakes," Temi di discussione (Economic working papers) 949, Bank of Italy, Economic Research and International Relations Area.
  8. Ricco, Giovanni & Ellahie, Atif, 2012. "Government Spending Reloaded: Fundamentalness and Heterogeneity in Fiscal SVARs," MPRA Paper 42105, University Library of Munich, Germany.
  9. Sylvain Leduc & Daniel J. Wilson, 2012. "Should transportation spending be included in a stimulus program? a review of the literature," Working Paper Series 2012-15, Federal Reserve Bank of San Francisco.
  10. Buchheim, Lukas & Watzinger, Martin, 2013. "Do Public Investments Increase Employment in a Recession? Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79826, Verein für Socialpolitik / German Economic Association.
  11. Sebastian Gechert, 2013. "What fiscal policy is most effective? A Meta Regression Analysis," IMK Working Paper 117-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  12. Emi Nakamura & Jón Steinsson, 2011. "Fiscal Stimulus in a Monetary Union: Evidence from U.S. Regions," NBER Working Papers 17391, National Bureau of Economic Research, Inc.
  13. Born, Benjamin & Juessen, Falko & Müller, Gernot J., 2013. "Exchange rate regimes and fiscal multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 37(2), pages 446-465.
  14. Sauro Mocetti & Guglielmo Barone, 2013. "Natural disasters, economic growth and corruption: a tale from two earthquakes," ERSA conference papers ersa13p726, European Regional Science Association.

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