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Regional Transfers

Author

Listed:
  • Raphael Corbi
  • Elias Papaioannou
  • Paolo Surico

Abstract

We exploit a series of discontinuities, at several population thresholds, in the allocation mechanism of federal transfers to municipal governments in Brazil to identify the causal effect of municipal spending on local labor markets, using a ‘fuzzy’ regression discontinuity design. Our estimates imply a cost per job of about 8; 000 US dollars per year, mostly driven by employment in services, and a local income multiplier of around two. A currency union model with nominal rigidities and liquidity constraints implies that the stimulative effects would have been substantially smaller if local government spending was financed by local tax revenues rather than regional transfers.

Suggested Citation

  • Raphael Corbi & Elias Papaioannou & Paolo Surico, 2014. "Regional Transfers," NBER Working Papers 20751, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20751
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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