Regional Transfers

98 Pages Posted: 15 Dec 2014

See all articles by Raphael B. Corbi

Raphael B. Corbi

London Business School

Elias Papaioannou

London Business School; Centre for Economic Policy Research (CEPR)

Paolo Surico

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 2014

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

Corbi, Raphael B. and Papaioannou, Elias and Surico, Paolo, Regional Transfers (December 2014). NBER Working Paper No. w20751. Available at SSRN: https://ssrn.com/abstract=2538337

Raphael B. Corbi (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Elias Papaioannou

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Paolo Surico

London Business School - Department of Economics ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

HOME PAGE: http://sites.google.com/site/paolosurico

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://sites.google.com/site/paolosurico

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