Regional Transfer Multipliers

Corbi, R, Papaioannou, E and Surico, P (2019) Regional Transfer Multipliers. Review of Economic Studies, 86 (5). pp. 1901-1934. ISSN 0034-6527

Abstract

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.