DP13304 Regional Transfer Multipliers
|Author(s):||Raphael Corbi, Elias Papaioannou, Paolo Surico|
|Publication Date:||November 2018|
|Keyword(s):||'fuzzy' RD, employment, government spending, Natural Experiment, wages|
|JEL(s):||C26, E62, H72|
|Programme Areas:||International Macroeconomics and Finance, Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=13304|
A series of discontinuities in the allocation mechanism of federal transfers to municipal governments in Brazil allow us to identify the causal effect of public spending on local labor markets, using a 'fuzzy' Regression Discontinuity Design (RDD). Our estimates imply a cost per job of about 8,000 US dollars per year and a local income multiplier around two. The effect comes mostly from employment in services and is more pronounced among less financially developed municipalities.