Type: Working Paper
Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment
Working Paper, EUI ECO, 2011/12
ACCONCIA, Antonio, CORSETTI, Giancarlo, SIMONELLI, Saverio, Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment, EUI ECO, 2011/12 - http://hdl.handle.net/1814/17194
Retrieved from Cadmus, EUI Research Repository
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 Italian law mandating the interruption of public work on evidence of mafia infiltration 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 effects of fiscal and monetary measures. While accounting for contemporaneous and lagged effects, and controlling for the direct impact of anti-mafia measures on output, our results suggest a multiplier as high as 1.4 on impact, and 2 including dynamic effects.
Cadmus permanent link: http://hdl.handle.net/1814/17194
Series/Number: EUI ECO; 2011/12