Regional multipliers across the Italian regions

Abstract

This paper estimates the multipliers of different types of government spending in the 20 Italian administrative regions throughout 1994–2016. We derive region-specific multipliers through a Bayesian random effect panel vector autoregressive model. We find that the EU structural funds, compared to the other types of government spending, provide the largest and most pervasively significant GDP multipliers, whereas the effectiveness of nationally funded government investment and, especially, government consumption shocks is more limited. An exploratory analysis of the regional multipliers suggests that they are positively associated with the amount of unused resources and the size of the regional economy.