Local multipliers at work

Cerqua, Augusto and Pellegrini, Guido (2018): Local multipliers at work.

Abstract

We measure the effects of a substantial place-based policy shock on the local labor market systems exploiting as an instrumental variable the peculiar information necessary to apply for capital subsidies in Italy during the period 1996-2006. The results show the presence of positive multipliers in the South of Italy, slightly lower than what was previously found for the US but much higher than those identified for European and Asian countries. The reasons for this finding lie in the greater accuracy of the data, in the relevance of the instrument used, and in the widespread underutilization of production factors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Local multiplier, place-based policy, local labor market.
• Subjects: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics

References

Andini, M., de Blasio, G. (2016), Local development that money cannot buy: Italy’s Contratti di Programma, Journal of Economic Geography, 16(2): 365–393.

Anselin, L. (1988), Spatial econometrics: methods and models, Kluwer Academic Publishers, Dordrecht.

Bartik, T.J. (1991), Who benefits from state and local economic development policies? W.E. Upjohn Institute for Employment Research.

Baum-Snow, N., Ferreira, F. (2015), Causal inference in urban and regional economics. In G. Duranton, V. Henderson, & W. Strange (Eds.), Handbook of urban and regional economics 5 (pp. 3–68), Amsterdam: Elsevier.

Baumol, W.J. (1967), Macroeconomics of unbalanced growth: The anatomy of urban crisis, American Economic Review, 57(3): 415–426.

Becker, S.O., Egger, P.H., von Ehrlich, M. (2013), Absorptive capacity and the growth and investment effects of regional transfers: A regression discontinuity design with heterogeneous treatment effects, American Economic Journal: Economic Policy, 5(4): 29–77.

Belotti, F., Di Porto, E., Santoni, G. (2018), Spatial differencing: Estimation and inference. CESifo Economic Studies, published online: 28 February 2018.

Blanchard, O.J., Katz, L.F. (1992), Regional Evolutions, Brookings Papers on Economic Activity 1992 (1): 1–75.

Cerqua, A., Pellegrini, G. (2014), Do subsidies to private capital boost firms' growth? A multiple regression discontinuity design approach, Journal of Public Economics, 109: 114–126.

Cerqua, A., Pellegrini, G. (2017a), Are we spending too much to grow? The case of Structural Funds, Journal of Regional Science, published online: 26 October 2017.

Cerqua, A., Pellegrini, G. (2017b), Industrial policy evaluation in the presence of spillovers, Small Business Economics, 49(3): 671–686.

Cerqua, A., Pellegrini, G. (2018), Spatial mobility effects of a place-based policy, mimeo, Sapienza University of Rome.

Chodorow-Reich, G., Feiveson, L., Liscow, Z., Gui Woolston, W. (2012), Does state fiscal relief during recessions increase employment? Evidence from the American Recovery and Reinvestment Act, American Economic Journal: Economic Policy, 4(3): 118–145.

Chodorow-Reich, G. (2017), Geographic cross-sectional fiscal spending multipliers: what have we learned?, NBER Working Paper No. 23577.

Criscuolo, C., Martin, R., Overman, H. Van Reenen, J. (2018), Some causal effects of an industrial policy, CEP Discussion Paper No. 1113 (Revised January 2018).

De Blasio, G., Menon, C. (2011), Local effects of manufacturing employment local effects of manufacturing employment growth in Italy, Giornale degli Economisti, 70: 101–112.

De Castris, M., Pellegrini, G. (2012), Evaluation of spatial effects of capital subsidies in the South of Italy, Regional Studies, 46(4): 525–538.

Drukker, D.M., Prucha, I.R., Raciborksi, R. (2013), A command for estimating spatial-autoregressive models with spatial-autoregressive disturbances and additional endogenous variables, The Stata Journal, 13: 287–301.

Duranton, G., Gobillon, L., Overman, H.G. (2011), Assessing the effects of local taxation using microgeographic data, The Economic Journal, 121(555): 1017–1046.

Elhorst, J.P. (2010), Spatial panel data models. In M.M. Fischer & A. Getis (Eds.), Handbook of applied spatial analysis (pp. 377–407), Heidelberg, Germany: Springer.

Einiö, E., Overman, H. (2016), The (displacement) effects of spatially targeted enterprise initiatives: evidence from UK LEGI, CEPR Discussion Papers No. 11112.

Faggio, G., Overman, H. (2014), The effect of public sector employment on local labour markets. Journal of Urban Economics, 79: 91–107.

Gerolimetto, M., Magrini, S. (2014), Spatial analysis of employment multipliers in Spanish labor markets, Rivista Italiana di Economia Demografia e Statistica, LXVIII(3/4): 87–94.

Gerolimetto, M., Magrini, S. (2016), A spatial analysis of employment multipliers in the US, Letters in Spatial and Resource Sciences, 9: 277–285.

Glaeser, E.L. (2001), The economics of location-based tax incentives, Discussion Paper No. 1932, Harvard Institute of Economic Research, Harvard, MA.

Goldsmith-Pinkham, P., Sorkin, I., Swift, H. (2017), Bartik instruments: what, when, why and how, mimeo, July 2017 version.

Kazekami, S. (2017), Local multipliers, mobility, and agglomeration economies, Industrial Relations, 56(3): 489–513.

Iuzzolino, G., Pellegrini, G., Viesti, G. (2013), Regional convergence, in G. Toniolo (editor), The Oxford Handbook of the Italian Economy Since Unification, Oxford University Press.

LeSage, J.P. (2014), What regional scientists need to know about spatial econometrics, The Review of Regional Studies, 44: 13–32.

Moretti, E. (2010), Local multipliers, American Economic Review: Papers and Proceedings, 100: 1–7.

Moretti, E., Thulin, P. (2013), Local multipliers and human capital in the United States and Sweden, Industrial and Corporate Change, 22(1): 339–362.

Nakamura, E., Steinsson, J. (2014), Fiscal stimulus in a monetary union: evidence from US regions, American Economic Review, 104: 753–792.

Serrato Suarez, J.C., Wingender, P. (2016), Estimating local fiscal multipliers, NBER Working Paper No. 22425.

Shoag, D. (2013), Using state pension shocks to estimate fiscal multipliers since the Great Recession, American Economic Review: Papers & Proceedings, 103: 121–124.

Van Dijk, H.J. (2017), Local employment multipliers in U.S. cities, Journal of Economic Geography, 17: 465–487.

Wang, T., Chanda, A. (2017), Manufacturing growth and local multipliers in China, Journal of Comparative Economics, advance online publication: 28 October 2017.

Wilson, D.J. (2012), Fiscal spending job multipliers: evidence from the 2009 American Recovery and Reinvestment Act, American Economic Journal: Economic Policy, 4: 251–282.